The overwhelming coverage in the Media talk is about the rising mortgage rates. Their views are that the market looks a lot like the Great Recession and anticipate that the Real Estate Market will collapse and so will prices. Yes, the fear of rising mortgage rates will have an impact on the market, but rising rates are already built into the market's reaction. No doubt market will suffer somewhat due to concerns about scared buyers and higher payments.
However, the current inability to control inflation and high employment numbers tell us something. There are a lot of people out there who are not affected greatly by rising mortgage rates. They have money or other assets saved and are not scared about a 1, 2 or even 3% rate increase. And those people are active in the market.
Prices have fallen due to general fear in the real estate market, but that has it’s limits. The fear of rising rates and concern about prices deal with the DEMAND side of the market.
But overall, the market is not anything like 2008 because there is a fundamental fact that people do not pay enough attention to: the SUPPLY side of the market. Back then, there was nearly 5X inventory compared to now. We are dealing with a historically low inventory of housing on the market today.
Yes, everyone is reporting about the impact on demand for homes due to rising rates. But not enough focus is aimed at looking at the Supply side of the housing market. We have less homes for sale than anything we have seen in decades. Yes, the overall real estate market's total transaction volume may shrink, but the the lack of inventory means prices will not plummet.
All of the speculation and concerns by talking heads on TV cannot overcome a simple economic reality: we have more DEMAND than SUPPLY right now. More people want to buy homes than are available in the market. Of course there are people dropping out of the market. Of course there are homes that are in horrible conditions or locations that the general public does not want to purchase. That exists in almost any market condition.
This lack of supply is why we are seeing the return of Offer Dates and Multiple Offers with homes selling well above list price. This seems not believable to people who are not actually in the market today. Some people are dropping out of the market but there are less homes to buy: it’s A WASH. The people who are still in the market have more money and are more competitive. They are taking all of the best homes and leaving everything else for the rest. The cream of the crop is where all the action is happening. And as more sellers realize this opportunity to benefit, the supply will increase.
When you are watching news clips on your social media platform, keep in mind that DEMAND is decreasing but so is the SUPPLY. Homes are just as valuable, if not more, because of shrunken inventory and more severe competition for even a smaller sub-segment. And these people who are in the market have more money and are cherry picking the best. The markets of 2008 and 2023 are not the same.
Use this data if you have not seen it before and use it to your advantage. If you are a seller who has been thinking of selling, there is no better time than today.
+ For perspective, Feb. 2019 (before COVID) the number of homes for sale was 4,600 (44% more than this year).
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