Real Estate… Can I Get Lucky?
Happy St. Patrick's Day!
Shamrocks, gold a’ plenty, and some lucky charms. I hope your celebration of Irish luck and culture brings much togetherness with friends and family on this jolly green day! Now... let's talk real estate.
*Ugh* Real Estate... Can I Get Lucky?
Here are some common sentiments I've been hearing lately:
"The housing supply is at an all-time low. Interest rates and home prices continue to rise... Did I miss my chance to buy?"
"Could home prices continue to go up? If I don't sell my house now, am I going to miss out on gains? Are we going to see 2007 all over again?
"Home prices keep going up and my landlord certainly knows it... I'm ready to buy a home, but these home prices can't be sustainable. What goes up must come down right?"
*In this market, it's easy to think "pinch me!"... No, not because you forgot to wear green today, but because this housing market craze has to be a dream! Let me share some data with you to help you make sense of everything happening in real estate. *
Inventory
According to Redfin, a national real estate brokerage, inventory continues to be low. In fact, it's at an all-time low. At the end of January, unsold existing homes on the market amounted to 860,000 units, which is down 16.5% from the previous year! (1.03 million units).
It's not that inventory is lower than the previous years. In fact, the U.S. homeownership rate climbed to 65.5% in 2020, which is up 1.3% from 2019. According to the National Association of Realtors, this is the largest annual increase on record! It's that demand is absorbing all the supply, and the supply just cannot keep up! They're all after me lucky charms!
Demand
The most recent data from the ShowingTime Showing Index tells us buyers are very active. When you compare November of 2021 numbers to those of the previous years, you'll find demand is higher than last year and MUCH higher than pre-COVID years.
The high demand is partially thanks to Millennials increasingly reaching peak homebuying age. The largest portion of Millennials is currently between the ages of 29 and 32, and data suggests 33 is the prime age to purchase your first home. Simply put, Millennial demand for housing will likely peak in the next three to five years! Sound the O' bagpipes, the Millennials are coming!
Interest Rates and Inflation
Mortgage rates increased significantly in the initial months of 2022 because inflation continues to report high. Have you seen the price of corn beef and cabbage lately? Not only is inflation high, but also COVID cases continue to fall and the economy continues to recover! The FED also told us in their meeting on 3/16 that they raised rates 25 basis points, and will continue to raise them throughout 2022. All that being said, it's expected that rates will continue to rise.
Although recently, we've seen lots of volatility in interest rates due to the uncertainty surrounding the Russia/Ukraine conflict. It's possible that global uncertainty could increase demand for the U.S. dollar and help combat some inflationary pressure.
All that being said, experts predict we'll continue to see interest rates bounce around in the shorter term, but the expectation is that they'll continue to tick up in the longer term.
According to Freddie Mac, the current mortgage rates are averaging around 4.16% on a 30 year fixed mortgage.
Closing Thoughts
So... can you get lucky? Here are my thoughts. Yes, interest rates and home prices are continuing to rise. And it's easy to get stuck in the data and want to time the market for the best deal... It's important to be informed, but don't let it dictate your life.
Buying a home is always going to be a great investment, but a home is so much more than an investment! To some, a home might represent freedom. To others, it's memories and an important part of their life story. It's a shelter for friends and family. A home isn't a piece of stock.
Remember the goal. The goal isn't to wait for the best price or the lowest interest rate--that's all secondary. The goal is to make a decision that's going to be the best for you wherever you are in life. And life moves fast! If you wait around for the market to do what you want, chances are, you'll never get lucky!
