To understand how weird the housing market is currently, we first have to understand what drives the housing market. There are four key components: Supply, demand, affordability, and credit availability.
While the first two components don't tend to change quickly, affordability and credit availability can move very rapidly. And that's exactly where we see ourselves today. Interest rates have shot up from 3% at the first of the year to a current rate of 7 percent. Fortunately, right now we don't have any credit availability issues . . . meaning home loans are still being made and insured which is great.
The other issue we are seeing today is most homeowners have refinanced and have extremely low-interest rates and they are thinking twice about making a move and losing those rock-bottom interest rates. Many that would like to move are thinking twice about moving and having to get a new loan at a higher interest. Although they are cashing out big money from their equity, the thought of losing that 2.5% rate is making would-be sellers think twice about a move.
So what can we do to make today's real estate market into a more normal market. . . NOTHING. We continue forward with our plans, we adjust accordingly. Why? Because we all know what goes up will eventually come back down again (especially interest rates) and even if you purchase a home today with a high-interest rate, in a few years I know from experience that rates will come down again.
As long as there is still money for home loans, I think our real estate market is in good shape and still robust, a great investment and an opportunity to create wealth for the future.
Don't let today's "weirdness" hold you back from your dreams. Call me and let me help you put a plan together
Read Article Here
Source:
Bloomberg