Here’s why real estate news can be better than you think

Are we on the verge of another major real estate downturn? Two of America’s most notable real estate economists, Leslie Appleton-Young and John Tuccillo, agree with their predictions, and the news could be better than most people are expecting.

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With all the headlines about a possible recession, rising inflation, big rate hikes and the stock market sell-off, are we on the verge of another big housing downturn? Two of America’s most notable real estate economists have their say on what to expect, and the news may be better than most people are expecting.

Leslie Appleton Young, who recently retired after serving as chief economist for the California Association of Realtors, and John Tuccillo, former chief economist for NAR and Florida Realtors, shared their perspective on the economic future of the real estate industry. Both agree that what is happening is unprecedented. Nonetheless, here’s their take on what lies ahead.

No stagflation given current statistics

Appleton-Young doesn’t think we’re in any danger of stagflation (a faltering economy coupled with high inflation) right now.

She explains:

It’s hard for me to go back to the stagflation of the 1970s when I look at the job market today, which is incredibly tight. We have an unemployment rate of 3.6 percent, which is just 0.1 percent up from February 2020. How do you get a downturn big enough to put such a large number of people out of work and that’s going to snowball lead down into a recession? I just don’t see it, at least not yet.

Challenges abound. The move from 2.7 percent mortgage rates to over 5 percent will certainly have an impact on the housing market. We already see this happening. The Fed’s goal of securing a soft landing and dampening demand just enough to deflate the inflation bubble without pushing the economy into a prolonged recession is not easy. The naysayers are in force. It’s important to put all opinions aside and acknowledge the strong fundamentals of today’s economy.

She continued:

I mean, look at the real estate industry, all the technological innovations of the last 30 years ended up being implemented during COVID. Agents and consumers were forced to do things differently, and they did.

[In terms of working from home], it is difficult to emphasize what a significant change the labor market, our way of life and the expectations of employees and employers have achieved in the future. And I think for the most part it’s been incredibly positive. I think we are well positioned for a lot of productivity and innovation in the future. So I’m not naive about the challenges and uncertainties ahead, but I’m also not in the Chicken Little camp at all.

There are two reasons for crashes

According to Tuccillo, crashes either occur because credit is slowing down or “the economy stinks.” It’s a lot harder to get a mortgage today than it was in 2000, which was a pretty normal year. Also, we have an employment deficit of about 2 to 3 million vacancies (there are more jobs than people to fill them).

In addition, demand still dramatically exceeds supply.

According to Tuccillo,

The challenge today is that we have tremendous demand fueled by government bailouts and low interest rates. Housing construction was destroyed between 2006 and 2008 and has never recovered.

The high demand is also being fueled by people who own real estate and feel they have nowhere to go.

Since supply deficits are self-fulfilling, they are self-reinforcing. [Many owners] sit in their homes and say, “I’d love to move, but I can’t possibly afford to move. With interest rates at 5.5 percent, house prices just blew me away, so I’m staying here.’ These units will not come to market.

The “dark underside of today’s market”

Appleton-Young commented on the issue of building generational wealth:

I think you are really bringing up the dark side of this market. The 15, 20, 25 percent increase in value in recent years has made many homeowners rich in equity. But it also means that homeownership is increasingly out of reach for Gen Z and some Millennials, as well as for the Black and Hispanic communities with historically low homeownership rates. [Appreciation] developed so fast that even though we had good wage growth, the inflation rate was even higher, so we’re really lagging behind.

The Impact of the “Great Move”

Appleton-Young and Tuccillo agree that one of the most significant changes related to the pandemic is how many people can now work anywhere because their work is happening in their heads and not in an office building.

The result was a leveling of the housing market, making it more homogeneous. To illustrate this point, the disparities in unemployment rates between states, as well as in home price growth, are not as great as they used to be.

Great advice for industry professionals

Tuccillo has this great piece of advice for industry professionals:

There is no national housing market. There are hundreds of thousands of housing markets. It is incumbent upon real estate professionals to know the facts about their market, employment, workers, entries and exits. You need to track demographics and employment to really know what’s going on.

And as a side note, when they come in, they need to know where to advertise their services. [For example]If I know that 25 percent of all immigrants to Bozeman, Montana, are from the Sacramento area, I will establish referral relationships in Sacramento. I’ll make myself known in Sacramento so I can come [these buyers who are relocating] before they come

What to expect as we look forward to the second half of 2022 and beyond

Here’s what Appleton-Young and Tuccillo say about our industry:

  • The inflation rate will fall. The inflation rate fell to 8.3 percent in April from 8.5 percent in March. This is still very high, but the delivery bottlenecks are gradually disappearing.
  • Interest rates may continue to rise before falling again and stabilizing. We won’t see 3 percent mortgage rates anytime soon because we have a significant inflation factor that will improve, but not fast.
  • The war in Ukraine, the lockdown in China and the ongoing problems with the energy supply remain big jokers. It will probably be at least two years before we get back to what was before this war.
  • The New York Fed regularly raises inflation expectations. What drives inflation is what people expect. Based on the latest polls, people expect inflation to be 6.3 percent by the end of 2022, 2 percent lower than today, which is good news. Still, that’s well above the Fed’s 2 percent target, which is likely to prompt the Fed to overreact.
  • Three-year expectations based on the New York Fed survey were relatively low for a while but are now slightly elevated at 3.9 percent, indicating some consumer nervousness.
  • Regarding the Fed, there is some support for revisiting the days of Paul Volcker. He sent up interest rates and unemployment to fight inflation. Lowering inflation comes at a cost, and the burden tends to fall on low- and middle-income people, as we’ve seen during the pandemic. The Fed has a dual mandate of low prices and low unemployment, so it’s a balancing act.
  • We will continue to see moderate growth and the unemployment rate will remain fairly stable from where it is now. For the rest of the year we will continue to see employment gains.
  • On interest rates, we expect the Fed to hike to around 6 percent.
  • There is a huge bottleneck in the construction and labor supply as well as the ongoing material supply shortages that result in the construction industry not being able to keep up with the current demand. Local regulations aren’t relaxing, so these restrictions will be with us for a while.
  • While people can exit the market now because of the rate hike, buyers will accept the reality and re-enter when rates fall by, say, 4.5 percent.
  • The markets can turn on a dime or they can also squeeze slowly. That’s one of the question marks we’re facing right now.

Last takeaways

Appleton-Young reiterated the importance of the real estate market in building intergenerational wealth, saving and owning strong wealth.

That goal is getting further and further away for many people in this market. We need to get more people up the homeownership ladder by building smaller, more affordable homes and relaxing overly restrictive zoning.

Tuccillo’s final insight is that not all market conditions have to be turbulent:

But they will be very interesting. In the next 18 months to two years we will not see a collapse. I don’t think we will see stagflation. I just think that every day there is something else that worries us. And we’re going to be worried and the markets are going to be nervous and the housing market is going to be nervous. But if you look at the underlying long-term trends and fundamentals, we’re doing fine.

Bernice Ross, President and CEO of BrokerageUP and, is a national speaker, author and trainer with more than 1,000 published articles. Learn more about her broker/manager training programs, developed by women for women, at and her new sales training for brokers at

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