Fall 2023 Challenges in Real Estate
Interest rates have risen and the inventory of housing continues to dwindle causing a seller’s market to some degree. Higher interest rates have forced many buyers to the sidelines hoping for some sort of reprieve. Sellers are seeing prices climb but many aren’t wanting to wade into a new home with a new higher interest rates so homes are not going on the market as fast as they once were.
Dave Ramsey, a national financial talk show host with a multi-decade real estate business, gave details on the national real estate picture. It’s rosy for the buyers.
“Folks are saying they are going to sit on the sidelines and wait on buying because they think house prices are going to go down,” Ramsey said. “House prices are caused by one thing and one thing only – supply and demand. How many houses are for sale versus how many buyers there are.”
He noted that there are fewer buyers in a bad economy with high interest rates but “there still has to be less buyers than houses for the price to go down. And that’s not going to happen.”
There are five million more 35 year olds right now in the Millennial generation – the prime house buying demographic – than in 2007. There are 128 million households right not compared to 116 million in 2007.
“There are 12 million more households operating that need a house. And in 2007 there were 2.1 million new housing starts and this year there are only 1.4 million new housing starts. Inventory is at half. The number of buyers would have to go down so dramatically before house prices go down. House prices went up nationally 32 percent in 2020, 18 percent in 2021 and seven percent in 2022. 2023 is projected at five percent increase. Every year for the next five years there will be fewer houses for sale than buyers to buy them driving the price up. Housing prices are going to go up for the next five years. If you’re ready to buy and in good shape financially, you need to buy now. Don’t wait on housing prices to go down. They are not coming down.”
Tim Hurst, COO of Own Mortgage is working to find ways to help buyers with mortgages in the challenging real estate environment.
“The biggest challenge is climbing interest rates and its causing home affordability to drop but that coupled with the shortage of inventory is causing housing prices to go up,” Hurst said. “No one wants to move from their home they bought with two or three percent mortgage rate to a home with six or seven percent rate. It’s challenging for all those involved.”
The lending side has seen the refinance business go by the wayside with the interest rate climb.
“Folks are paying more than asking price as well making homes less affordable,” he said. “A lot of people are not looking to do that and you can take that and work it to your advantage by purchasing a home at that higher rate knowing that rates have been higher due to the growing inflation problem. Current numbers show inflation curbing and we’ll see that interest rate number drop by two or three points in the coming years.”
Hurst noted the current market is a product of the COVID over reaction.
“The Fed was very reactionary with everything they did. When everything shut down, they lowered the rates to stimulate the economy. Rates were so low, people could go in and buy a house that was $100,000 to $150,000 more than the year prior. But then that created the home inflation value the past few years.”
There are challenges all around the industry but no matter the inventory or interest rate, there’s always something creative to be done to help both buyers and sellers.
“Never marry the interest rate, marry the home,” listing agent Darrin Roberts stated.
If you’ve found the home of your dreams and it fits in the budget, then pull the trigger on the home purchase. Once interest rates go down, then shop your refinance and still enjoy your home. Roberts also noted that in this economy, “work with your lender to see what a monthly payment looks like with the current interest rates.”
Don’t break your budget and keep your options open.
“The lack of inventory is slowing down the industry but we like to think and work hyper local and show those benefits to our sellers so they understand they are still getting maximum dollar for their home,” Roberts said. “And if the market slows down, take time to fix those little things you’ve been looking at. This will make your home more attractive when buyers come back around and your investment will pay off. The market is still strong.”