Remember When…

Retirement should be a happy time. You’ve worked hard for the past 20-40 years and saved your money so that somewhere down the road you can retire and have your money work for you instead of the other way around. There are some storm clouds on the horizon that might have you feeling a bit anxious, but don’t worry, there are things you can do.


We want you to be happy in retirement. That’s why it’s important to “Retire Right.” Right is an acronym that stands for the five things you need to manage well: your risk, your income, your money’s growth, your healthcare, and your taxes. If you manage those five things, you’ll be able to retire happier.


Since this is a financial show, I’m required to tell you that you have the opportunity to retire happy but it’s not a guarantee. If you follow those steps though, we have a lot more confidence in your ability to retire happy.


Remember the good old days maybe a year back when you could put your house on the market on a Saturday morning for $400,000, and by the end of the day, you could have 27 different offers? I might be exaggerating a little bit, but I might not. At that time, you could get boatloads of offers and even some that were over the asking price. Those were the good old days. If you did the same thing today and put your house up for sale on a Saturday, you’re not going to have 27 different offers at the end of the day. You’ll probably need a little more time on that. I recently came across a headline from a Fortune Magazine article.


“These 210 Bubbly housing markets could crash 25 to 30%- Moody’s again   slashes its home price forecast.”


We live in Austin, Texas, and this region is a perfect example of the type of housing market mentioned in the headline. From May to August this year, Austin home prices went down over 7%. They’re probably going to go down more because of climbing interest rates. The Fortune article goes on to talk about how mortgage purchase-out applications fell 13%, which coincided with mortgage interest rates exceeding 7%. Historically speaking, 6-7% mortgage rates are not out of control, but just a year ago, they were 3%.


When you take these rates, and you couple them with frothy home prices, new monthly payments are in the upper bounds of history. If you account for income, it is more expensive to buy a home now than it was at the very height of the housing bubble.


In August, Moody’s Analytics expected home prices to fall between 0-5%. One month later, in September, they downgraded closer to 5-10%. Now, it’s even worse than that. They’re expecting home prices to decline between 10-15%. The worst part is they’re also assuming that there’s no recession coming. If a recession does hit, Moody’s predicts home prices will decline anywhere from 25-30% and even more in hot markets, like Austin.


We’ve had all these good times with booming markets, but one of the biggest mistakes that people make is assuming that because the housing market has been growing for the past few years, it must be a good investment and that it’s going to keep going up forever. Nothing goes up forever. Everything is cyclical.


A week or two ago I had a conversation with one of our clients. He was thinking about buying another house for rental purposes and he started going over why housing is a great investment. He thought it was a great investment because he never looked at the value of the homes.


You get statements every month for your stock market accounts so you can see when they go up and down; there’s a lot of risk in the stock market. You might not realize that there’s the same amount of risk in the housing market. Because you don’t value houses every day you don’t see the risk.


I asked this client if he had $700,000 in rental home values right now, how much would it have sold for a year ago? It would have been around $850,000. If you put those rental homes on the market a year ago you could get multiple offers over the asking price by the same day. I asked him what would happen if he did that today and that’s when the light bulb went off in his mind. A year ago, he could have sold that house for maybe $850,000. Today, he’d be lucky to get $700,000 and he might get even less.  That means he would have lost $150,000 or more in the housing values that he owes. We often don’t think about this with real estate because we don’t see that monthly statement.

The point I’m making is that housing markets are going south. The impact of rising interest rates means mortgage rates are rising. It’s more expensive and harder to buy a house.Buyers are evaporating like Lake Travis. The buying pool is so shallow that people are starting to reduce their prices so they can sell.


Based on what we’re seeing, it’s going to get worse. I bring this up because there are a lot of people who think real estate will make them millions. I would advise you to be very careful. As you’re getting ready to retire you want to make sure you have your retirement planning ducks in a row. I encourage you to give us a call. Let’s sit down and put a Retire Right report together for you. It’s free and personalized. As we look at the horizon, we see a lot of storm clouds. I think we can all agree that  there’s a high probability that a recession is coming. If a recession comes, you must think about how that will affect your retirement security.

Are you still going to be able to retire when you want to retire? Are you going to be able to maintain the lifestyle that you want? Will you have to keep working? If the markets go down another 20%, could you lose that financial security that you’ve worked so hard to build? We don’t want that. Give us a call so we can help you get on track to retire happy.







Past performance is not indicative of future results. The material above has been provided for informational purposes only and is not intended as legal or investment advice or a recommendation of any particular security or strategy. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information obtained from third-party sources is believed to be reliable though its accuracy is not guaranteed, and Centennial Advisors, LLC makes no representation or warranty as to the accuracy or completeness of the information, which should not be used as the basis of any investment decision. Information contained on third party websites that Centennial Advisors, LLC may link to are not reviewed in their entirety for accuracy and Centennial Advisors, LLC assumes no liability for the information contained on these websites. Opinions expressed in this commentary reflect subjective judgments of the author based on conditions at the time of writing and are subject to change without notice. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from Centennial Advisors, LLC. For more information about Centennial Advisors, LLC, including our Form ADV brochures, please visit https://adviserinfo.sec.govor contact us at 512.265.5000.





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