Here are the main reasons why our market is so crazy right now.
Everyone knows we are living in boom times as far as sellers are concerned. It’s increasingly common for sellers to find themselves in a multiple-offer situation, and prices keep going up. Naturally, this has a lot of people asking, “When is the market going to crash?” Buyers are understandably frustrated by the state of the market. Maybe they’ve lost a multiple-offer situation a few times and have decided to sit the market out until it crashes.
The bottom line is, the market is showing no signs of slowing down, never mind crashing. I strongly advise against buyers sitting things out until a crash occurs, and here are my reasons why.
The first reason is that the market isn’t being driven by mortgage-backed security issues like the crash in 2008 was. Instead, today’s market is the simple result of low supply and high demand. The decrease in supply started all the way back in 2008 and 2009. With the market in shambles, it didn’t make sense for builders to start building homes during the crash. Only until very recently have builders caught up to the building rates from before 2008. It is estimated that the market is missing 10 to 12 million homes that never got built during this period.
Also, the baby boomer generation is getting older, but they’re holding on to their homes. Home healthcare was not available at the quality it is now 10 years ago, so when people grew older, they would typically move to a retirement home. Now, they simply hire people to bring them healthcare while keeping their property.
While we’re talking about generations, they can also help explain the increase in demand. For example, millennials saw the market crash in 2008 and decided homeownership was too big of a risk. Because of this, their demand for homes was stifled for a bit but is coming back strong as they get older. Meanwhile, Generation Z’s demand for homes is coming on early. Combine this with low interest rates, and the high demand we see today starts to make a lot of sense.
This all sounds pretty crazy, but here’s why I don’t think it’s going to end anytime soon: It’s going to take more inventory and less buyer demand for the market to balance. What I predict will happen is that when interest rates rise, buyer demand will go down slightly. As people continue to sell their homes, the market should slowly start to stabilize.
You may have heard people talking about ‘zombie’ or ‘ghost’ foreclosures, or in other words, foreclosures that haven’t come to the market yet. They sound spooky, but the reality is that there is no evidence they’re happening at a high rate at all.
When you put all the above factors together, it becomes clear that a crash is not happening anytime soon. If you’d like to sell in the hot market or take advantage of low interest rates, give us a call or shoot us an email. We’d love to help any way we can.