Unseen Forces Keeping House Prices on the Rise

The Expert Podcast

Description:

• Real estate prices have risen, and with interest rates also climbing, many people expect a crash. However, this is unlikely to happen for several reasons.
• For over two years, many potential buyers have been shut out of the market. People have been putting in multiple bids, often over asking price, without success.
• An article from MSN highlights how renters in the US are losing hope of homeownership, as buying a house has become a demoralizing experience.
• A particular example from Dallas shows a person who placed seven bids, all above asking price, without success, and eventually overpaid $60,000 for a house built in the 70s.
• There are still many buyers who were rejected on previous offers, often competing with 10-15 others. These buyers are still out there, feeling hopeless and desperate.
• Over the next 8-12 months, more inventory will come to the market, but it will quickly be absorbed by these persistent buyers who are still eager to purchase.
• Many of the people who couldn’t secure a home were pre-approved for mortgages and could afford to pay more. They just couldn’t compete with offers from all-cash buyers or those with fewer contingencies.
• Now, with more inventory, these buyers will have an opportunity to buy homes. The extra inventory won’t lower prices; instead, it will allow these buyers to successfully secure a home by paying over the asking price if necessary.
• Renters are already facing higher rents, and many are paying more than they would for a mortgage. Rent increases are not affected by interest rates, so many renters are still eager to buy a home to avoid rising rental costs.
• The demand for homeownership is still strong, despite higher interest rates, because renting is often more expensive than owning. In many cases, renters' payments have gone up by $500-$600, making homeownership even more attractive.
• The people who tried to buy homes in 2020 and 2021 are still out there. Their reasons for failing to buy were primarily due to inventory shortages, not affordability.
• Even with rising interest rates, people are still willing to pay above the asking price for a home, especially those with stable incomes and good credit scores.
• Overall, home prices are unlikely to drop significantly. Any price reductions will be from inflated amounts, not the market value. The strong demand for homes will ensure that prices remain stable.