There's no question we are in a tight residential housing market currently, both locally and nationally. How long that will last is the unanswered question, but I'll give it a shot here for your consideration. Anecdotal evidence shows that the decisions people are making based on current market conditions could have a lasting impact on real estate.
Garrett & Megan bought a house 2 years ago. They have a two year old and another on the way. While pleased with the value of their current house, and casually looking for something larger, their biggest fears are that they will be outbid on a house they like because they need to sell their house...and they don't want to be homeless. The options to borrow money from parents, risk 2 mortgage payments, or rent their current home seem risky and not attractive enough to pull the trigger...so they occasionally search online.
Randy & Nancy have been in their home 21 years and both are nearing retirement. They don't need the 3,000 sq ft that they have now, and both agreed they'd like to be proactive & find a single level patio home or townhome to free up some funds while minimizing clutter & enjoy travel. They know that their home would likely go in moments with high visibility on MLS & professional marketing, but the place they want in the neighborhood they desire is either not currently available or doesn't exist. They've talked to a couple builders, but lumber prices have spiked along with development costs, and so they have hit pause for now until things change.
First time buyer Rachel is renting for $1450 a month & her lease is up shortly. She's preapproved, realizes that purchasing is the financially best decision, and is ready to pull the trigger when/if something comes. She's lost out on two houses already, which frustrates her, but she's committed to the search. However with the lease renewal coming, she's not sure if timing will work for now. A friend told her about a for sale by owner, but they want $10k more than most homes she's seen, and she's nervous about what values might do.
Real scenarios like this illustrate the desire to move is real, but the ability is not. As of Jan. 5, 2021 just over 5% of all mortgages, or 2.74 million, are still in government or private sector Covid-related mortgage bailouts, according to Black Knight, a mortgage technology and data firm, and reported in an article in the Pittsburgh Post Gazette. These plans allow borrowers to delay their monthly payments for up to a year. The payments are then either made up at the end of the loan or when the home is sold.
About 8.5% of renters, or 2.82 million households, missed, delayed or made reduced payments, and 7.1%, or 3.37 million homeowners, missed mortgage payments. In September 2020, about 26 million people missed their student loan payment. The proportion of student borrowers who missed a monthly payment has remained steady at 40% since May, per the Chicago Sun-Times.
Here's the problem:
- Some renters missed rent & credit card payments in the COVID-19 shutdowns, impacting credit scores & the immediate ability to purchase
- Landlords stuck with eviction moratoriums have lost money, causing them to fall behind on rental property payments and placing them in financially unstable conditions.
- Development prices, lumber prices, & permits have risen exponentially
- The gap of affordability between new and existing homes has expanded
I will not tell you a housing bubble is imminent. However, I do know that the sustainability of our current situation is precarious at best. Yes, vaccines are here. Restrictions on schools & businesses are lifting. People are optimistic about travel & entertainment recovery. These are promising and hopeful for sure. Yet the data for the last 24-36 months tells us housing shortages through a world pandemic is impacting the ability and desire to move. And once some of those conditions are altered...by political or economic means or both...we will see swings that will cause adjustment to be made.
Some recommendations as you buy, sell, and invest. Ask yourself these questions:
Is It Better To Move Now Or Later?
Your decisions initially may be based upon what you're hearing on the news, from a friend, or the current availability. Change your thinking not just to current conditions or stories, but consider your journey in life also. Sometimes, yes, making money is the key factor. However, if you're like most of the clients I've worked with, your move would be based on life circumstances or changes. Here there's no storm to weather in real estate, just a change of the pendulum from buyer's market to seller's market, etc. So what? That doesn't change the why, merely the what. So think outside the box on the what a bit. Prices rise for both buyers and sellers. If that gap is always there, maybe you need to think hard on whether a move now places you on a path to enjoy the other things that are most important in life. COVID has many of us thinking that life is too short. If that's true, why wait? The dollars work themselves out over time, and a lot of that may be beyond our control. So make a move based on your situation, and those you love.
Will It Get Easier To Move?
It all depends on what you mean by easier. Will the housing market shift to a more balanced market soon? Will new construction pick up? Will prices settle down? I like to say to clients, "I left my crystal ball at home." Wish I could find it. Real estate is like the weather--always something to be hopeful for & always something to complain about. If you're a seller, it's easier NOW. Average prices, multiple offers, little or no contingencies--best market for sellers since the early 2000s. If you're a buyer, it's statistically over time easier on your wallet RIGHT NOW. Interest rates haven't been going anywhere. If I had a dollar for every time someone told me they wish they had bought real estate 5 or 10 years ago, I'd be...investing it in real estate right now. In addition, we're all aging. Would you like to move while your health is good, or when the move is forced upon you? I can't answer that for you, and my joke is that as also a pastor & medical responder when people tell me they're not moving until they die I answer, "Well, I've helped with that too." Easier is a state of mind that consumes people until they're paralyzed by their own inability to choose to live life.
Should Recent Changes In The Real Estate Industry Impact My Decision?
In the last few years, some of the big websites that house the data that local Realtors & brokerages offer have made moves to streamline the buying and selling process. There are remote showings, electronic offers, virtual closings, and many other ways the process has evolved. Some of this is extremely beneficial to people like you, who are looking for a streamlined approach to buying and selling. Hiring a professional who is experienced & knowledgeable helps you navigate thru all of the noise to bring to light what's important to you. I always tell people my job is to give them as much information as possible to help them make an informed decision. As virtual as our world has become, real estate will always be about real people going to see real property and making real decisions. Leaning on our experiences and those of others helps move us forward when we use technology or terms that might not be as familiar. Color schemes, the latest kitchen designs, new build layouts, energy concepts, and neighborhood designs all evolve, and so does the transaction process. Roll with it, enjoy it, and on the other side you'll have a sense of relaxation and a few stories to tell in your new place.
In summary, I refuse to share any real estate conspiracies or doom saying wisdom because the sky isn't falling. Even in our "worst" markets that didn't happen. I won't even sing the song "Tiny Bubbles." The click bait will always be there in titles....admittedly like the one above, but it's not about the story others are telling. It's about your story. Your dreams. Your path forward. Take a few moments to pause and consider this, and you'll be in a better spot as you look to your next place.