Will the ongoing conflict in the Ukraine affect the housing market?
I would like to start this blog by saying that my heart goes out to all affected by the Russian invasion of the Ukraine. The acts of the Russian government are truly senseless, and I hope that whatever the resolution is, that it is swift. The Russian invasion of the Ukraine has sent a jolt through the hearts of the American people. As we watch from afar, we have no idea what it’s like to be a part of this conflict. I am sorry that so many news outlets and journalists have attempted to use this conflict to promote their political or personal narratives. I won’t attempt to relate to the people of the Ukraine, nor will I compare this conflict to anything we are currently facing in our Nation.
The housing market has been in a constant gain since the early weeks of 2021. Historically low interest rates coupled with inflation, limited housing inventory, and historically high prices of materials and labor have created the monster that is now the “normal” real estate market. I say “normal” because the sheer definition of normal has been lost when it comes to real estate. The definition of a typical/normal real estate market is having 6 months of housing inventory available at any given time. This simply means that if no new houses came available for sale for 6 straight months we would have enough homes for every buyer for that same 6 month period. We have not had the level of inventory to maintain that definition of normal in over 3 years.
So, how does the invasion of the Ukraine affect our housing market here in the US, and specifically the Charlotte region? Well, the first impact of the war has already been felt in our pocketbooks by the rising cost of oil. As oil costs increase the average consumer tightens their purse strings and reduces overall spending. Costs of consumer goods rise due to the increased costs to ship and cost of labor increases due to the increased expenditure to get workers to their destinations.
Since housing is not your typical consumer good you have to both look at the cost of existing housing, rents, and the cost of new construction. New construction costs increase because if the increased costs of both the materials needed to build and the cost of skilled labor. Since we have been at record high materials costs since mid 2020 it’s projected that the cost of new housing will only increase. Increasing costs of new construction means consumers look towards resale options to avoid the unknown expenditure of new homes, increasing costs of existing housing. As existing home prices increase, consumers then look towards rental options which then increase the cost of rents as you still have a supply and demand imbalance. Unfortunately, this is the natural domino effect.
Like many I remember the recession of 2008 and recall vividly the impact it had on both housing and the markets. Gas was over $4/Gallon and it felt like the market was never going to recover. Fast forward to now and it feels similar, but there are dramatic differences today compared to the recession of 2008.
Please know I’m not predicting a recession, but I have to take note of what so many of the news outlets and “professionals” are saying. The reality of the situation is they are glossing over clear market statistics and factual differences between the housing market in 2008 and now. In 2008 you had major differences in both mortgages and housing inventory. Before the crash we had sub prime mortgage lending, heavy use of adjustable rate mortgages, and higher than normal inventory levels. Housing inventory at the time was higher than today’s numbers as builders were building for future growth. Builders were getting hundreds of homes on the market at a time, flooding an already saturated market of resale homes.
Today, we have very few homes on the market and builders cant get enough materials or skilled labor to even meet current demand, much less future demand. Our mortgage industry today is also completely different than 2008 given the lack of subprime mortgages and less than 5% of mortgages today are being written as adjustable rates.
We still have a historic inventory shortage and it’s only getting worse. Year to date we’re down 10% in number of listings compared to February of last year and the influx of buyers into our market is ever increasing. In 28173 alone we only have 25 active single family home listings, with nearly half having only been on market for 7 days or less.
Although it may be too early to have truly felt the effects of the conflict in the Ukraine, all signs are indicating a continuation of our market trends similar to that of 2021. If this is the case, our area is poised for another property value increase of 10-20% in 2022. Only time will tell, but if you’re still considering buying or selling a home, now is still proving to be a great time to do so.
As always, if your thinking about buying or selling contact me directly at 980-250-2795
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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.