This week I read an article - one of many - about how many home buyers are obsessively focused on their low-interest rate they secured in the decade-plus of artificially low rates. And they are right, it is cheaper to own a home with a low-interest rate. But many forget to observe current housing trends to see where prices may be heading, so......
Home prices have come down in many areas to adjust to the reality that many buyers confronted with higher rates simply can only afford to buy less expensive homes. This has triggered a shift in developers focusing more on rental properties that have increased in value with a combination of rising rental rates as fewer people choose to buy - or are forced to rent - combined with enormous tax incentives and loopholes that make being a landlord (especially a big one) more profitable.
Again, too many are focused on short-term trends. So what could happen LONG-term? At some point rate hikes will pull back as we enter a high probability or actual recession. At that point we could see those not severely impacted by an economic downturn re-enter buying mode. Pent up demand is a powerful driver of markets: if you doubt that simply look at 2021/2 as a reminder. And what did that do? It pushed prices up, up, up, up, up.....
NOW.....combine pent up demand (sales volume has dropped about 25-30% year over year, a historically huge number, even after massive gains in 2020-2022) with millions of younger people entering the home buying market, many fed up with super-high rents, retirees buying an additional home (or two), people living longer and working longer, massive in-migration (legal and otherwise....millions!), the greatest transfer of wealth in history (Many TRILLIONS of "stimulus"!) elevated building and labor costs.....and then throw in that we are already under-supplied/under-built by MILLIONS of homes (and the average home is over 30 years old and in need of renovation/repairs).....
What happened to oil and gas prices the last time the world realized it needed lots of oil and gas and a War broke out amongst two of the world's biggest producers triggering a huge supply disruption? Hmmmmm...... 🤔
So while buying now may be more expensive fueled by higher rates, buyers beware: WHEN (not if) rates come down (maybe not as low as 3%), the housing markets could reawaken dramatically, possibly post-covid-lockdown-style, and we KNOW what that does to prices....
