As the summer weather heats up, REALTORS and armchair economists are all looking at the housing market with the same question: Is the Real Estate Market Cooling, Collapsing, or Climbing?
Some are positive, others are pessimistic, and others are just skeptical that prices can continue to increase in double digit percentages month after month.
California Reopening of the Economy
The June 15th Reopening of the state of California brought changes to California Real Estate Industry’s pandemic practices including the elimination of sign-in forms at showings, PEAD forms, social distancing, and capacities for open houses. This marks a stark contrast from the rigid protocol and pages of forms from March and April 2020. A recent article in Bloomberg tries to capture the frenzy and causes of the global real estate market’s activity. Real estate is local, yet this housing market is experiencing this competitive, tight inventory, fast-paced “listed then sold” plot line across the country and globe.
5 Factors to Today’s Hot Real Estate Market
The interesting thing about today’s market is that it is not isolated to Southern California or major metropolitan areas like the Bay Area, New York, or Los Angeles. States like Idaho, Utah, and Texas are experiencing this surge in home buyer demand in suburbs and communities that ten years ago were barely on the map.
As the Bloomberg article describes:
“A cocktail of ingredients is sending house prices to unprecedented levels worldwide,” economist Niraj Shah wrote in the report. “Record low interest rates, unparalleled fiscal stimulus, lockdown savings ready to be used as deposits, limited housing stock, and expectations of a robust recovery in the global economy are all contributing.”*
Let’s put those five factors in a list:
1 – Record low mortgage interest rates
2 – Fiscal stimulus package from the government
3 – Flush savings accounts from lockdowns in the pandemic
4 – Low housing inventory
5 – Expectations of a economic recovery
Now taking the real estate situation with those 5 factors in mind, for the real estate market to fall out (or the bubble to burst, whichever metaphor you prefer), what would need to happen?
What is more likely than a bubble or real estate market collapse is a cooling or recalibration. A recalibration might not mean prices drop or that it isn’t competitive, but that it is not as competitive. If the market is recalibrated, then the number of offers on one specific property might decrease from 60 offers on one house (not uncommon) to a more reasonable ten offers. When more homes come to market, then the days on market might climb higher than the single digits. If mortgage rates increase, and home buyer’s purchasing power goes down, then home buyer’s might not have a palate for higher list prices and sales prices might flatten out.
What are your thoughts on today’s market?
Are we cooling, climbing, or is a cliff ahead?
If you are a homeowner considering taking advantage of your golden opportunity to sell, then find out how much your home is worth today.