July 19, 2021 at 9:47am | Mac Rogers
Are cracks in the housing market finally appearing? There is no doubt that right now the real estate market is red hot wherever you go. There are a lot of people forecasting doom and gloom. How this will be worst than the mortgage meltdown. Or we are doing it all over again.

This "run" that we've had in real estate has lasted longer than the average real estate cycle. This is what is causing a lot of people to worry. Some even say a bubble. If you've watched my videos, you know how I have gone over this several times already. How and why this is not a bubble.

So what will make this market crash? Burst? Well, definitely not demand. Demand right now is still high. For every house that one of my clients have made an offer on, we competed with at least 7 offers on average.

Supply or inventory? At the beginning of the pandemic this is what the "negative" people were focused on. They said that once forbearance ends we will have a glut of properties hitting the market. Did you know that even if all the properties in forbearance was indeed to go on the market, it still won't meet demand? Inventory is at historical lows. The builders haven't been building enough to meet our demand.

Another mortgage crisis? Definitely NOT!!! Credit standards have changed since the mortgage meltdown. The quality of buyers right now are so much better than 10 years ago. Credit risk and product risk are statistically low.

Interest rates? We are still at historically low interest rates right now. For the past two years, rates have been forecasted to increase. And it would increase for a short time and then go back lower. Currently, the forecast is again for rates to climb to 3.5% by the end of the year or early next year. Higher than where we are right now but still near historical lows.

Economy? There's been talk of a lot of money printing and a lot of unemployed people (jobs number came out and it was higher than expected). Money printing and inflation, usually the hedge on that are tangible assets. In some ways real estate might be a better investment if we do start to hit inflation. Unemployment?

Unemployment disproportionately affects mostly renters right now. In fact, as our economy goes full steam ahead, I would argue that it could make real estate even hotter as more and more people start getting jobs and start thinking about buying homes.

So does this mean we go on forever? Higher and higher? Absolutely not. We all know nothing last forever. Eventually some event or a combination of event will cause a panic or actual financial hurt that makes home buyers or home owners rethink their whole housing situation.

I believe that the two things that can cause a slow down (NOT A CRASH), are price and interest rates. There will be a certain point where price, no matter what the demand, will become too expensive for most people. Add to that higher interest rates and you will start to have a lot of buyers that either can't qualify for properties that they like or can't afford it or just simply won't pay those amounts.

In some ways I am starting to see signs of this in some markets. Buyers are now getting "pickier". It's too early to tel if this is indeed the case. One thing I know is that every time I have said to myself, we possibly can't go any higher, we just go higher some more.

Mac Rogers
Broker
CalBRE: 01354261

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Mac Rogers is not a tax accountant or an attorney or financial adviser. Therefore, the information in these videos shall not be relied upon as tax, legal, or financial advice from a qualified perspective. If you need such advice, please contact a qualified tax accountant, attorney, or financial adviser. We have taken reasonable steps to check that the information in this video is accurate but we cannot represent that it is free from errors. You expressly agree not to rely upon any information contained in this video - it is for entertainment purposes only.

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