- Is the market going to crash?
- Should I wait to buy?
- Should I sell while the market is hot?
It is my effort in this article to answer these questions using information from legitimate sources like CNBC and Business Insider. No one can ever truly predict the market and it is important to consider ALL factors when making your decision. With that said, we can look at statistics and compare to similar previous/historic markets.
In the past year, 11% of Americans have moved. The uptick in remote work, various TikTok trends, and more time with family has driven the desire to get into a new home for many people. Stimulus deals, low interest rates, and investors leveraging numerous homes has led to demand heavily outweighing supply. There aren’t enough homes on the market, and the ones that are sell quickly at a significant amount over list price. Below are some stats from the market in Minnesota.
High down payments and creative strategies are required to win in bidding wars. Even well-qualified buyers (and their agents) are understandably getting discouraged after submitting offers on 4 or 5 homes before getting one accepted.
In addition, builders are behind due to high cost of lumber and other building materials. Making it nearly impossible to get into new construction under budget and in a timely manner. This is the reality of the market, and people are beginning to question it.
Google reported that the search question “When is the housing market going to crash?” has spiked a whopping 2,450% in the past month.
With prices higher than we’ve ever seen it is totally understandable to speculate a crash is coming, especially after what happened in the early 2000’s.
However, a few experts on Investopedia argue that times are different now and that’s all it is – speculation. Around 20% of mortgages in 2005 and 2006 went to people who wouldn’t have been able to qualify under normal lending requirements. Banks lowered their rates and lending requirements, which spurred a home buying frenzy that drove median sale price of homes up 55% from 2000 to 2007. When it became evident home values could actually go down, housing prices began to plummet triggering a massive sell-off and many mortgage defaults would lead to millions of foreclosures over the next few years.
The difference now is that the underwriting process at banks and mortgage companies is much more strict so it is harder to qualify for a loan. In addition, pandemic forbearance and equity cushion have helped the case.
“The housing market is more competitive than we’ve ever seen it, but a couple indicators are causing us to ask whether we’re nearing a peak in terms of how fast demand and prices can grow,” said Daryl Fairweather, Redfin’s chief economist. “Sellers’ asking prices may be starting to flatten in what so far appears to follow a typical seasonal pattern. There is also a decline in mortgage applications signaling people have began dropping out of the market.”
“If these trends continue,” she said, “it could mean that we are not in the midst of runaway home price speculation or a housing bubble.” She goes on to explain that this does mean some markets will have little to no price growth, many of these being in the West, where Californians have flocked.
So on the buy side, if you do qualify under the new guidelines (and are aware of what it takes in this market), it probably still makes sense to invest in a home instead of renting. Interest rates are also beginning to rise so if you do fit the mold, maybe it’s worth it to buy at a higher price point rather than when rates are higher. There is never really a perfect time to buy other than when it works best for you personally.
On the sell side, yes, you should sell your house right away and put all of that money in Bitcoin (BTC) since it’s too hard to buy when contingent on a sale of current home.
Just kidding, don’t do that. But it is definitely a sellers market, and very common to get multiple offers at 10% over list price. Inventory is low and if you are thinking about selling, now is when you will most likely get a favorable price in a short amount of time.
Taking all of this into consideration, the general consensus from experts is that the market is showing signs of ‘cooling’ rather than ‘popping’. And that we can expect a similar, but slightly calmer market throughout the rest of 2021.
Cheers to all my readers, and please come back for more next week.
Brady
Questions, comments, concerns? Email me – BradyArthur@edinarealty.com
Sources
https://www.cnbc.com/2021/04/13/when-is-the-housing-market-going-to-crash-consumers-ask.html
https://www.businessinsider.com/should-i-buy-a-house-right-now-2021-4
Brady Arthur Homes and Drones 