Real estate has been a key focus for news outlets across the country in recent months thanks to rising interest rates and fears of an impending recession. Thanks to the rising cost of just about everything across the country every blogger and news anchor wants to be the first, second, or who cares how many’th person to announce the impending doom. I cannot stress enough how important it is to check your sources and motivations of these so called “experts” and to educate yourself properly on what is actually happening.
When I say “Actually Happening”, I mean that you have to acknowledge the facts and data surrounding your local market. What’s happening in Detroit is a lot different than LA, which is a lot different than here in Charlotte, which is a lot different than in the Outer Banks, etc etc. Stop getting your news and home buying advice from the 20 year old Tiktoker in Florida who was 6 during the last recession.
What’s worse than getting your advice from underqualified bloggers are the tone-deaf articles attacking Millennials for wanting housing to become more affordable. Literally, this is the headline pulled from a news site about “entitled Millennials”
Yes, there are thousands of people on Twitter and Tiktok cheering for a housing market crash, but it doesn’t mean they are entitled for wanting housing to become more affordable. Just like millennials aren’t wrong from wanting housing to be more affordable, sellers aren’t wrong for being worried about their home values declining. It’s a door that swings both ways and we have to better understand the condition of our market and what is ACTUALLY happening to know what’s best for you as both a seller and a buyer.
I’m not the most educated, best-read person when it comes to economics and the stock market, but I understand real estate and the impacts housing prices have on day-to-day family economics. Supply and demand is one of the simplest concepts to understand with any product and whether it’s gas or housing, it’s fundamentally the same concept. Too much inventory? Lower the price. Not enough inventory? Raise the price. Pretty simple to understand considering how we’ve watched housing, just like gas, go up up up in price. So, what happens to housing when inventory overtakes demand?
Unlike gas, housing isn’t a consumer good that you buy every day and it doesn’t fluctuate in price as quickly as gas can. But, when buyer activity falls below that of the demand housing reacts in the same way over a longer period of time. The caveat to housing is that mortgage rates drastically impact both buyer interest and affordability. As mortgage rates rise, buyer activity falls and therefore inventory increases leading to price reductions. Increasing rates too fast, like the FED has, leads to buyers pulling out of the market and leaving sellers wondering what to do with their homes. As sellers reduce their prices and expectations, we begin to see the signs of a recession forming.
The problem with this is as buyers pull out of the market to rent, rental rates are increasing due to increased rental demand. Rental rates in our area are going up nearly 10-20% annually, which far exceeds the increase in mortgage rates from 3% to 5.5% over the last few months. Buyers are more willing to pay the increase in rental rates with the hope that housing prices will drop 10% or more in the next 12 months.
The question however, is that actually going to happen? Is the market really shifting and if so, for how long? Sellers don’t sell their homes for a loss unless they have no choice. A divorce, death, lost job, etc. are the most common reasons for this to happen. Otherwise, sellers would rather hold on to their homes instead of sell low and return to the rental market. This tends to reduce the overall supply leading to more of a supply and demand equilibrium and a more standard 1-3% equity gain per year.
Buyers and sellers both need to understand that a recession and a housing crash are not equal. Home prices may fall in the coming months, but interest rates are already declining from their peak in early June. Serious home buyers are still buying, especially in our Charlotte market as they know in the long run owning a home is a far better investment than renting. If you’re considering buying or selling a home this year, I’d love to speak with you further about how I can help and provide custom tailored advice.
If you’re considering buying or a selling a home in the Waxhaw area and would like to learn more about the process, please don’t hesitate to call me at Briggs American Homes at (980) 250-2795. I would love to help you and your family with all of your real estate needs!
Check out my latest client testimonial! “We are so fortunate to have worked with Matt Lawson! He has been an invaluable resource throughout the entire process of buying our home. Right from the start, we got a good feeling about him. He could relate to our needs and really helped us bring our options into focus, saving us valuable time and energy. He not only has years of experience as a realtor. He has worked as a home inspector, published numerous articles to help inform prospective buyers… I can’t say enough. We found the right realtor. And the right house!” L. Berger
Matt Lawson, MBA is the Owner and Broker in Charge of Briggs American Homes, a real estate team at Keller Williams Ballantyne area. Matt lives and operates his business right here in Waxhaw, NC and is passionate about all things Real Estate.