People ask me pretty often if I think that we’re experiencing another real estate bubble at the moment. For the record, I do not. I think the market is very difficult for buyers lately and prices are definitely at their height, but I do not think we’re facing another crisis soon. In fact, many real estate experts and market analysts (including Gary Keller) think we have another 4 years or so of a strong market before we have another lull. That sounds scary and it is definitely frustrating for people who sell real estate like myself, but it’s just the cycle of real estate. When I say “healthy” I do not mean that prices will continue to increase. Actually, if prices were to continue increasing, I do think we would be heading towards an abrupt halt. What I mean by “healthy” is that it will be a fruitful market. At some point, the greater economic powers will influence the real estate market and cause some sort of hiccup like always. There are many reasons that the housing market can run amok and I have explained some of those in previous posts. So, for now, let’s just focus on the good news for at least the coming year.
I recently read an article from Realtor Mag entitled “4 Reasons to Get Happy About Housing,” that highlights 4 major factors that will hopefully (and likely) strengthen the housing market in the near future.
- Low Interest Rates - Rates are currently below 4% for qualified buyers. The Federal Reserve is expected to delay increasing those rates this year, which should encourage more people to take advantage of these great rates. I’m currently in the process of purchasing a new house and our mortgage rate is below 4%. I’m very excited about that. While many houses are being sold near list price, the rates are so low that the monthly payment is still often less than buyer’s expect.
- The Job Market and Wages are Still Improving - The national employment rate is below 5% at the moment, which is a vast improvement from what we experienced a few years ago. The more jobs there are, the more homeowners there will be. In addition to this, working wages are quickly being increased and have risen about 2.5% in the last year. While these wages are increasing, they are not typically keeping up with the cost of living, which makes it tough for those folks to buy homes.
- Millennials are Buying - This is one that I’ve been talking about for a long time. A lot of economists are so befuddled by Millennials that they didn’t expect us to want to buy homes like every other generation ever. I think they assumed we would all prefer to live in tent cities and spend all of our money on pointy shoes… Anyways, Millennials that are a bit on the more senior side are now largely able to afford to purchase. The reason I say that is because the more “senior” millennials are still just in their mid 30s. There are 75 million Millennials that will compose the engine of the economy very soon. These Millennials will soon be transitioning into more senior roles and careers, which will strengthen their finances.
- Post-Recession Purchasers - Unfortunately, many people lost their homes to foreclosures during the recession. Those individuals were often made to wait a certain amount of time before they would be considered a reliable borrower by lenders again. Mot of these folks have served their time and are now ready to purchase again. Plus, many of these folks were over-leveraged and needed that time to rebuild their finances. It’s hard to stipulate exactly how many of these folks are expected to re-enter the housing market, but I’m sure that they will be as soon as they’re able.
That’s all for this time. As you can see, there is quite a bit of good news on the horizon. I don’t foresee us having a major issue for some time. The real problem that we’re facing right now if that our inventory is low, which makes buying hard. However, if you have a really good Realtor, they can surely find you the right property. If you or anyone you know if in need of a Realtor, please let me know! I would be more than happy to assist you or your friend and family with buying or selling.
Troy Franklin Gandee