If you’re waiting to buy in this market, I don’t think that’s the right move.
Is this market going to crash? As a buyer, should you wait for prices to come down to make your move?
If you have been waiting since last year, that probably hasn’t worked out very well. If you look at the graph at 1:23 in the video, the year-over-year appreciation rate here in Arizona (17.4%) is well above the national average (12.6%). 17.4% is a massive number, and as far as waiting out the market, it’s not hard for me to tell you that that’s not the right call.
I know it’s frustrating and you may want to throw in the towel, but allow me to make a shameless plug: Our team has helped over 40 buyers buy homes this year. You can find value in an agent who hustles and works hard, but there are other things to account for when buying a home. It’s obviously important to hire a good Realtor, but there are some pretty crazy things to contend with in this market.
Lending practices have changed since the last market crash of 2008. Here are four expert opinions from professionals and organizations that have devoted their careers to giving great advice to the housing industry:
The Joint Center for Housing Studies in their The State of the Nation’s Housing 2021 report: “… conditions today are quite different than in the early 2000s, particularly in terms of credit availability. The current climb in house prices instead reflects strong demand amid tight supply, helped along by record-low interest rates.”
Nathaniel Karp, Chief U.S. Economist at BBVA: “The housing market is in line with fundamentals as interest rates are attractive and incomes are high due to fiscal stimulus, making debt servicing relatively affordable and allowing buyers to qualify for larger mortgages. Underwriting standards are still strong, so there is little risk of a bubble developing.”
Bill McBride of Calculated Risk: “It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”
“Based on this information, why wait to buy?”
Mark Fleming, Chief Economist at First American: “Looking back at the bubble years, house prices exceeded house-buying power in 2006 nationally, but today house-buying power is nearly twice as high as the median sale price nationally. Many find it hard to believe, but housing is actually undervalued in most markets, and the gap between house-buying power and sale prices indicates there’s room for further house price growth in the months to come.”
The Great Recession was awful, but it’s not as easy to get a loan now as it was then. Now you have to go through an actual qualification process, whereas back then all you needed was a pulse to get approved for a mortgage. On top of that, there was a ton of new construction happening back in 2008, but that’s slowed down considerably. Those two factors weigh so heavily that I don’t see the situation reversing and causing supply and demand to go in opposite directions.
At 4:37 in the video, you can see the expected rate of appreciation for the next four years. Appreciation is predicted to go down, but it’s still appreciating, meaning homeowners will still be making money during that time. Based on this information, why wait to buy? If you buy now, you’ll have equity in your home. Let’s face it: You don’t want to buy a home when the market is declining because that means your home will decrease in value.
So get yourself an agent who’ll keep things positive, work hard for you, and find you a home. The bottom line is that I can’t imagine homes being worth less than they are now in one year. If you remember my last video, I talked about supply and demand creating a more balanced market in the future. This video and that video do not contradict each other. I still believe supply and demand will balance out, but that doesn’t mean prices will decrease.
As always, if you have questions about this or any real estate topic, don’t hesitate to reach out to me. I’m happy to help.