The media is finally adjusting to understand where we are heading in the housing market. They are using both past and present data and talking to economists showing you where we are going [in the housing market] if a catastrophe doesn’t happen.
And catastrophes can look different in different situations.
This is also something to consider. I'll also show you how demand in the second home market is dropping, which will only make things easier for buyers who can't find [primary] houses.
Market Watch released a great article discussing the inventory crunch. It even has interactive maps you can have fun with if you check it out.
This gives you a clear understanding of what was happening before and what’s happening now.
Market Watch says, “A lack of new home building following the housing crash more than a decade ago coupled with a flood of institutional investment capital and demographic forces — like the giant millennial generation entering the housing market in force — have diminished the number of homes available for sale. As a result, housing prices have surged.”
Remember when people were saying millennials will never buy [a home]? That they are burned out and will never want to purchase a home. I'm not sure who said that, but it wasn't us. However, it indicates that we are completely wrong.
“While rising mortgage rates usually cool demand in the housing market, low levels of available homes may complicate this traditional relationship, analysts say,” Market Watch continues.
We are seeing it now. Interest rates are at 5.5 if you have a good FICO score of about 720. Yet, the demand isn’t going anywhere.
Market Watch also reports research from Realtor.com that says, “estimates that the U.S. is currently short some 5.8 million single-family homes, whereas before the pandemic the gap was 3.8 million. Even if builders nationally were to double their pace of construction, Realtor.com estimates it would take five to six years for that gap to close.”
This is the critical step in understanding where we are and why the inventory challenge is so difficult. It is not a fabrication. And closing the inventory deficit takes five to six years.
Previously, I told you some economists saying we’re going to be back to normal pre-pandemic [market] around two to three years with the inventory. That is only if nothing crazy happens.
The American dream of owning a home, starting a family, and living in it is still alive and well.
According to Market Watch, “Even before the pandemic, millennials had begun maturing into their prime home-buying years and were hitting major milestones such as getting married or having kids that often precipitated a desire to buy a home. The largest cohort of the population is now ‘wanting to become homeowners,’ Blomquist said. ‘So that’s really accelerating the trend in the lack of inventory.’”
Among our customers, there is still a feeling, a fear of missing out [if they don’t buy a home]. And a lot of the things that people miss when we are talking about the housing market is this emotion attached to it that we sometimes forget to talk about.
There is a massive drive here, and a need, especially through the pandemic, that people feel the need to own a home.
This rush to buy one, regardless of where the rates are, is still around? That, coupled with the data, makes for an interesting market, which we’re in right now.
The need is so big, that “Rising rents and the popularity of vacation platforms like Airbnb [...] have prompted a wave of investors scooping up homes to convert into short- and long-term rental units in many parts of the country,” according to Market Watch.
The demand is cooling down a bit, but the housing market is still hot. And the lack of inventory, along with inflation, and the raised rates, still increase home prices.
Redfin shows in their article titled “Demand For Second Homes Is Way Down From Last Year’s Boom” a graph of the declining demand for second homes.
This eases the inventory gap a bit, allowing more people looking for primary homes more opportunities to buy. But this isn’t enough to close the inventory gap and satisfy the overall housing demand.
There is another great article by Market Watch, and they sum it up with this:
“Even despite signs that the housing market will cool in the coming months, buyers should not expect to suddenly get great deals. As MarketWatch Picks recently reported — after talking to five economists — it is unlikely that home prices will fall significantly. ‘Home prices will keep going up because there aren’t enough houses available to meet demand, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy,’ Holden Lewis, home and mortgage expert at Nerdwallet, told us.” (excerpt from Market Watch)
As I said earlier, the media is finally catching up on the actual state of the housing market. If you go on Google, the search results are more diversified instead of saturated by doom and gloom. Some of the top results on Google are:
So, I’ve been getting some great comments (some are crazy) on my YouTube videos, but I want to go through the list of rebuttal points one commenter posted because I know some of you are thinking the same thing.
So, if you want my advice, keep on looking at real estate.
Look up those areas that have an absolutely hot [housing market] and where the rents are high, like Miami. See what makes sense for you, because if you can do an Airbnb, or you can rent a home in those places, and you have the money [to buy], that’s a great investment.
For many years, we've witnessed this. The real estate market is cyclical.
Just be cautious where you go, pay attention to the statistics, and don't listen to the drivel that some individuals use to terrify you with no proof to back up their claims.
