For the past six to seven days, we have seen the real estate market slowly stabilizing in terms of interest rates. Three weeks ago, we saw a rapid increase in rates, and people are speculating if it will reach 6% or 7%, but it has been stable in the low fives for now.
And if you watched my previous videos (or read my previous blogs) you’ll know why.
The Fed raised rates, and they will meet around eight to ten more times this year, so they might raise rates even higher. But since the market is aware that it will happen, they managed to increase the mortgage so it matches the projected rise in future rates. That has contributed to the mortgage rates stabilizing.
We have yet to see where they end up by the end of the year.
However, with the real estate market heading into spring, we expect to see a hot real estate market. It is typically cyclical (and regional) but we are already starting to see the market picking up more.
Anyways, back to the question.
A lot of people have been saying “[the housing market] is gonna crash. . Maybe at the end of the year we’re gonna see a 10-20% decrease in real estate.”
It makes me wonder if I am looking at the same data these people are looking at. Because that is not the way I see it.
During my research, trying to answer this question, I came across an interesting opinion piece from CNN.
According to CNN, “Don’t worry. A crash isn’t coming. […] That is especially good news for first-time homebuyers.”
And that’s good to know.
They have a hard time right now. They keep on putting offers in and out.
BUT, let me tell you, we have multiple buyers that are looking for homes in the millions in price and they just have to keep on pushing it up. And that’s in California where everyone says everyone is moving out from when it’s the opposite!
CNN continues, “Homeowners generally are on a solid financial footing and have significant equity. Buyers are purchasing homes they can afford, without resorting to risky, exotic financial products like they did before the last housing crash.”
So, let’s set that as a boundary here. We’re talking about comparing 2007 to 2009 with the current market that we’re in.
Most loans that are being given out typically are to people that can afford them.
I was in the market around 2004 or 2005. I was a real estate agent then too, just like I am now. And anybody can buy a home at that time. It’s completely different right now.
We're selling, and mortgages are being granted to responsible folks who can afford it.
This opinion article closes with, “it's important to recognize it for what it is: not a crash, but a move toward healthy, and a small step in mitigating our affordability crisis.”
This other article from Zillow is from about a month and a week ago (Mar. 24), they say “Most panel members expect inventory to reach pre-pandemic levels by the end of 2024.”
To understand what they mean by pre-pandemic levels, let’s take a look at this excerpt from the same article: “In the survey, experts were asked what year they expect to see inventory return to at least a monthly average of 1.5 million units. The most optimistic 4% answered 2022, and a further 37% answered 2023. The most frequent answer, from 38% of respondents, was 2024, meaning a cumulative 79% of respondents expect such a restoration of inventory sometime between now and the end of 2024,” according to Zillow.
Right now, “total inventory has fallen from a monthly average of 1.6 million units in 2018 and 2019 to just over 1 million in 2021, and monthly figures in 2022 are lower still,” Zillow says.
That’s true. We are significantly lower in inventory in different regions throughout the US.
What does that mean? There are not enough homes for the demand. So, even if the interest rate has gone up a little bit more, the demand is still there. Especially in May, June, and July, when the market is hot.
The way that the world is right now, with our economy, some inflation, and maybe some recession going on (some people say we’re already in a recession), we’ll see what happens.
But the way that it is right now, the market’s not going anywhere.
Let’s read the data together. Because a lot of us here use our emotions to dictate how we read the market and we’re hoping that the market drops because we want to be able to buy an amazing deal.
But in reality, that’s not gonna happen.
We are looking at numbers because at the end of the day, this is an affordability and inventory problem. Not the demand.
As the market shifts, as we go through the rest of 2022? And as we stand right now, 2022 looks like an amazing market for real estate.
It’s going to continue to expand. In some areas, they are going to drop a little bit [in price] because they are overpriced, but mostly, the demand is there. You just have to open your eyes and see it.
