How Likely Is a Housing Downturn in El Paso? | Winter 2022

How Likely Is a Housing Downturn in El Paso? | Winter 2022

Hi, thank you for checking out the YouTube channel. My name is John Peña and in this episode we're going to talk about the likelihood of El Paso seeing a housing downturn. Hi thank you so much for checking out the channel.

My name is John Peña with Peña El Paso Realty Group and we are the best real estate agency in El Paso and to show you that, to back that up with some actual facts here, we're going to talk about the likelihood of a downturn, a housing downturn happening in El Paso. Because we talk to people all the time and one of the biggest questions that people have

right now, we're talking kind of November, winter 2022, is what's going to happen with the housing market? Should I buy? Should I sell?

Should I wait? What's going to happen? Am I in trouble here? Is my house going to go down in value?

And so in order to provide you with enough value, we want to be able to speak to these things and so we're going to just jump right into it here. And so, you know, it's no shock or it shouldn't be any kind of surprise that essentially the economy is essentially headed towards recession.

Some might say that we're already there. And so, you know, a lot of the data that we're going to take for this episode actually came from Redfin and basically the premise is that a lot of these pandemic home buying hotspots are much more likely to see a downturn in the face of a recession.

And so since we know that we're heading into recession, we wanted to talk a little bit about what that might mean for El Paso. And so, you know, as inflation persists, as the stock markets tumble, it's no surprise that essentially higher interest rates are having a pretty big impact on buyer demand.

And so, you know, 2020, 2021, when interest rates were so low, there was obviously very strong buyer demand in the market. What was the one of the effects of that is that home prices increased pretty substantially. Now the question is, with interest rates not so low, right?

We're hovering around 7% more or less. What's going to be what's going to be the result of that? You know, now, are we going to see prices that went up? Are we going to see them come down?

Are people going to be underwater on their homes? These are the questions that we want to help you better understand. So Redfin basically has analyzed 98 U.S. metro cities and signed an overall risk score to each 100, meaning that the likelihood of a housing downturn of homes losing value substantially

is pretty darn high. Zero, meaning that there's essentially a very, very, very low likelihood of home prices coming down. Now, remember, even with a recession, we're unlikely to see a housing market crash like

we saw in the Great Recession. Now, why is that? Because the factors in the economy are significantly different. Mostly, most home buyers have a pretty fair amount of equity in their home.

Remember, people that bought their home in the last couple of years or even before that, you know, they might have bought their house for $200,000 three, four years ago, and now guess what? Their home's worth like $240,000, $250,000.

So that's like instant equity in addition to what you've already paid off. So homeowners have a lot more equity in their homes, not as nearly as much debt as back in those times in the Great Recession, and unemployment is pretty darn low. And so because of those factors, very few people that we're going to see, very few people

believe that there's going to be a housing market crash. So that's, of course, great news. However, the old adage of what goes up must come down is going to come into play here. So let's talk about that a little bit, you know.

Home prices soared at a pretty unsustainable pace or rate in that kind of pandemic home buying era of 2020 to 2021. Now home values, they may drop from the peak that we saw in 2021 and early 2022, but the decline is really only on paper for those people that are going to stay in their home

for at least a couple of years because typically home prices do increase over time. And so, you know, my only concern, honestly, are for these military buyers who came in at the peak of this kind of pandemic home buying craziness, bought a home when the prices were at their highest.

And now maybe in three, four years, they have to PCS somewhere else and now they have to sell. So I definitely don't think those folks are going to lose their shirt on these deals, but I think they're more likely to kind of maybe break even because they're not in a position to be able to hold the house for long enough to have the values kind of ease

back up with normal appreciation. So for the rest of you, if you're going to be able to hold your house for a couple of years, you're going to be just fine because even if prices come down a little bit, even with normal appreciation of three to five percent year over year, you know, if you're

in the home for three, four or five years, you're going to make up that difference. And so we're not too we're not too worried about about that. So now let's get to it. So what cities are most likely to see a housing downturn, meaning home prices come down

substantially? This will be an interesting one. We'll see if you can guess. But let's just let's start off. I'm going to give you the top 10 cities that are most likely to see a downturn. Riverside, California, they had a score of 84.

All right. These are like the east suburbs of L.A. Boise, Idaho, had a score of 77. The median home price in Boise, Idaho, was three hundred and thirty thousand dollars in May of 2020, five hundred and fifty thousand dollars in May of this year.

All right. Cape Coral, Florida. We just came from there. Don't get me started on Cape Coral, Florida. Seventy six point seven.

North Port, Florida. Pretty close. Seventy five. Vegas. Seventy four. Sacramento.

Bakersfield. Phoenix has a score of 72. They saw home prices, median home prices go from about three hundred thousand dollars to four hundred and eighty five thousand dollars in two years.

And then rounding out those top 10 cities that are most likely to see a downturn. Tampa, Florida, with a score of 71. Phoenix, Arizona, with a score of 70. Now, these cities saw

really unsustainable growth. Why? Because you had a ton of people moving there. Tons of people buying second homes. Right. And that's not ideal, which we're going to talk about here in a little bit.

So those areas, it's very, very likely that those that housing, those markets are going to see a downturn. Prices are going to come down. Right. They have very high scores.

Now, let's talk about the cities least likely to to see a housing downturn. So these essentially are the cities that are going to be most resilient in the face of a recession. Now, number one, Akron, Ohio, had the lowest score of twenty nine point six.

Number two, Philadelphia, score of thirty point four. Number three, Montgomery County, Pennsylvania, score of thirty one point four. And number four, guess who? El Paso, Texas, with a score of thirty two point two.

Some of these other cities with a very low risk of a housing downturn. Cleveland, Cincinnati, Boston, Buffalo, Kansas City and Rochester, New York. So that if you're in El Paso and you bought a home is fantastic news, because what it essentially says is that while there is a risk

that we're going to see a housing downturn in comparison to the rest of the country, it's pretty it's very low. Right. We're not in great danger of seeing a massive housing downturn. Why is that? Let me give you a couple of reasons.

So basically cities that have a median sales price of under three hundred thousand dollars. By the way, we're El Paso now is around two thirty nine to forty. These cities are considered very affordable.

OK, if you can still get an average home price under three hundred thousand dollars, that's an affordable that's an affordable cost for a home. And affordability basically means that people are more likely to be able to afford a home even with higher interest rates.

Right. The other thing is that that that kind of massive affordability attracts homebuyers from other states. Right. So it keeps our market attractive to not only people who live in our city, but folks who might be looking for a more affordable place.

Well, El Paso is going to be, you know, on the top of that list. Number two, there's a very, very small percentage of homes in El Paso that are actually second homes or vacation homes. Basically, according to Redfin, only one point eight percent of homes

in 2021 were purchased as second homes, whereas in Cape Coral, 23 percent of the homes purchased in 2021 were purchased as second homes. OK, and then the third reason that that it's unlikely that we see a massive downturn in El Paso is that basically our price growth.

Right. In 2021, the average home in El Paso rose about 14 percent. Now, that might sound like a lot, and it is compared to the three to five percent that that's more kind of normal. But keep this in mind.

Boise saw a 31 percent increase in 2021 alone. Austin, 32 percent. Right. So, you know, with all of that being said, I think it does. I hope it puts your mind at ease if you've recently purchased a home in El Paso,

because the economy, inflation, recession, stocks, all of this. It has a tendency to stress us out. Right. It makes us anxious. It makes us concerned about our financial future. Right.

And this is a little bit of good news, because even though, you know, you may feel that, you know, if you bought last year or the year before, maybe you feel like, oh, man, I bought at the peak of the market. Right. I bought when the prices were highest and now the prices are going to come down.

And when I have to sell, I'm going to lose my shirt. I'm going to lose money that that's not, I think, really the case. You know, if you're in a position to hold your house, like I said earlier, you're just fine.

You're you know, it's going to be a little bit of an up and down and you can ride the downs until the ups start coming back. And even like I said, if you have to sell your home, you know, now or even next year.

Yeah. Are you going to are you going to get that? Are you going to get top dollar for your home? No, no, you're not. Because those those days have passed.

We've transitioned from a strong seller's market, and it's very likely we are going to transition into a buyer's market here for a year or so. And so you may not. You may not be able to sell your home

for a significant amount more than what you bought it for. But again, it's still likely that you're going to at least break even, you know, and at least you don't have to worry about, you know, really ending up underwater on your home

because you purchased a home in El Paso. And what does El Paso have? It has affordability, right? You still paid a pretty reasonable dollar amount for your home

because homes in El Paso are still very affordable. And yes, we're all going to have to ride that roller coaster of ups and downs. But at the same time, at least according to Redfin and tons of other data that we look at, the risk of a of a significant

housing downturn in El Paso is not very high. So I hope that does put you your mind at rest. Of course, if you have any other questions or concerns, please consider reaching out to us.

We're always here to help answer questions. Call me. Email us. That's that's should be part of the service that real estate agents provide to you. You know, I think most people believe that

real estate agents, they they show up when there's a commission at stake. And then after that, before that, like they're nowhere to be found. That is not the position that that we take. We're trying to add as much value as we can.

We're not necessarily just trying to be there for the quick commission grab, but we want to be a guide to help you kind of through the ups and the downs. And that also means just answering questions for you, regardless of whether you're going to buy or sell a house,

being there to to to kind of be a reflecting board, so to speak. So if you have any questions, any concerns, please don't hesitate to reach out to us. We hope that you had a fantastic Thanksgiving.

It was funny this morning. We went outside and there were snow on the tops of the mountains, which is always a unique sight for us. So other than that, we hope that everybody's doing great.

Speaking of the mountains, and this is a complete 180, but um, next week's video or the week after, I'm going to do a video about the Franklin Mountains race. There's a big race. I'm doing the 50 mile race.

It's in January through the Franklin Mountains. I don't know if many of you, if you live here, if you get a chance to to hike and explore the Franklin Mountains. But if that's something that you're into,

there are some amazing spots in the Franklin Mountains. Once you get up there, I mean, it's it's it's it's pretty breathtaking. So anyway, in the next week or so, we're going to highlight

some of that footage for you. And we'll get off the real estate horse for a second and mix it up. Thank you so much for watching the YouTube channel. Honestly, we wish you and your family the absolute best.

And we'll talk to you next time.