Homebuyers Can't Catch a Break... But That Won't Doom Real Estate By Brett Eversole
It's the worst time in history to buy a home... according to the American people, at least. Polling giant Gallup has been asking Americans how they feel about the housing market in an annual survey for the past two decades. (There's sparse data going back to 1978, too.) According to that poll, there has never been a worse time to buy a home. But a better way to say it might be that there has never been a more difficult time to buy a home. Last year, the problem was low inventory... combined with seemingly infinite buyers. Now, it's sky-high mortgage rates pushing monthly payments higher. Difficult or not, the question is what comes next. And as I'll share today, the strongest bet is that the current boom will continue. Let me explain... Homebuyers can't catch a break. They've gone from one extreme to the next... The COVID-19 pandemic helped fuel an insatiable demand for housing. And the inventory simply couldn't satisfy it. We can see this through the months of supply on the market... in other words, how long it would take for every listing to sell at current rates. The measure hit an all-time low in late 2020. It has recovered since then. But that's mostly due to falling demand, not higher supply... Active listings are still down around 70% since late 2016. There just aren't a lot of homes to buy. And that has led to a truly manic market for buyers. I'm sure you've read the stories about homes getting dozens of offers the day they list. Homes are routinely selling above list price, too. Heck, in 2022, more homes have sold for at least $100,000 above list price than ever before – and the year's only half over. The market in 2020 and 2021 was homebuyer hell. It's still happening today. But now, there's an even bigger problem... skyrocketing mortgage rates. The speed and scope of the mortgage-rate rise is unprecedented. The 30-year fixed-rate nearly doubled from the middle of last year. And it hit a decade-plus high in the process. Take a look... If you're financing a home, this is your biggest hurdle. A mortgage payment basically boils down to the home price and the interest rate... And when that rate nearly doubles, mortgages get a lot more expensive. In April, real estate brokerage Redfin reported that the typical mortgage payment was up 39% versus the year before. Simply put, homebuyers have gone from limited buying options and brutal competition... to a huge crash in affordability. But will either of these crash the housing market? In a word... no. The first scenario – low supply and high demand – is why prices have been soaring in the first place. If mortgage rates fall and that stays the same, prices will keep moving higher. High mortgage rates are cooling demand for now. Existing home sales are down double digits from their January high. But outside of the pandemic boom, they're still at one of the highest levels of the last 15 years. Demand would have to absolutely crater from here to cause a major decline in home prices. And even if mortgage rates stay high, that kind of decline isn't likely. Unfortunately, homebuyers still probably won't catch a break anytime soon. But are the American people right? Is now the worst time in history to buy a home? No – not by a long shot. And the smart bet is that this boom will continue. Good investing, Brett Eversole P.S. I don't normally share this... But I've been putting my money where my mouth is in real estate. For the last two years, I've poured all of my new investment dollars (aside from retirement accounts) into a specific type of real estate investment... And for the first time, I'm telling the full story of what I'm doing and why. You can find all the details here. Further Reading "An inflating bubble is one of the best ways to make massive gains," Vic Lederman writes. Folks are piling into real estate right now, looking to make "easy money" as home prices remain high. And this housing boom still has plenty of room to run higher... Read more here: A New Housing Bubble Is Underway. With mortgage rates on the rise, demand is cooling off in the real estate market – which usually signals that we should stay away. But if we refuse to put our money to work, we could miss out on huge gains as the sector explodes higher... Learn more here: Why You Shouldn't Fear Soaring Home Prices. |
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