The internet makes it seem like everyone’s an economist:
Inflation + High Interest Rates = X for the housing market.
Social media players are solving for X like a math maven in a calculator store, claiming the moment things will go dark and offering all kinds of “IMO” investment advice. The truth is, no one knows what’s going to happen with the housing market next week, let alone in a year. And while so many are focused on calculating what we don’t know, I find it more productive to focus on what we do know.
- Interest rates will make an impact, and they haven’t yet. Many of the people actively in the market during the interest rate hike already locked in lower rates and were in the throws of a multi-day escrow. The impact on the housing market is coming, but we haven’t seen the real estate effect in full until we have no more grandfathered rates.
- Inflation hits everything in the economy, including home prices.
- Supply and demand is still a big problem. Without getting too deep into the weeds on numbers, we can see the supply issue at a high level: Research firm Statista found that in 2021, there were only 726,000 new construction homes for sale, compared to nearly 2 million in 2010. The National Association of Realtors found that in 2021, there were 5.64 million existing homes sold. Let’s combine new and existing homes and round up—that’s 6.4 million. There are 330 million people in the United States. If just 2% of the US population wanted to buy a home, less than a third of those (2 percent!!) had a chance. There just aren’t enough homes. (great news for owners and sellers, bad news for buyers)
- Current homeowners are dramatically more qualified than homeowners in 2007. The Federal Reserve shows that in 2007, over $300 billion in mortgages were being serviced by owners with a credit score below 620 (aka subprime loans). Today, that number is below $25 billion.
- Over time, the housing market has always gone up. This is why buying and holding creates wealth over a lifetime and even generational wealth for your children.
- Investments always come with risk.
A real estate agent is not an economist. An economist is not a fortune teller. A fortune teller is not someone I’d go to for investment advice. No one can tell you with 100% confidence what will happen with a real estate investment, but with careful consideration of the knowns, your personal goals, and prudently hiring the right experts to help, you can get in the game and not lose a wink of sleep, no matter what the future holds.
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