First, I don’t think we are in a real estate bubble, but I do think we are in an economy that has become prohibitively expensive for too many.
The better actual first answer is the one I’ve said for most of my career – I’ll tell you in 18 months what happens tomorrow, combined with “I don’t know, but I’m trying to figure this out.” No one knows with certainty, but I think I have a reasonably educated and experienced prognostication.
See the video below in which Mike notes that this rapidly shifting market is confusing, and is defying the models.
But … I do think that we are going to see a softening of prices, stabilizing of interest rates (hopefully), and homeowners are going to have to adjust back to a real estate market where what you want to get for your house is 100% irrelevant, and that you need to make X in order to go buy Y is equally relevant.
- Nationally, home prices were up 20% in May 2022. That is not sustainable. It just isn’t.
- Housing inventory is rising, quickly.
“I think we’re in a transitioning market rather than a transitory market; everything is different now.
This is a bit of a scary time in the real estate market. In the end, it will be OK. The move from a super-hot, multiple offer, escalating offers market to a much, much more conservative and even aggressive pricing strategy market has been fast.”
We’re moving to equilibrium very very quickly.
What happens next?
Buyers are going to adjust to this market much faster than will sellers; this may be the opportunity many have been waiting for (although, if they’d bought a couple of years ago, they would have been able to live in their owned home and theoretically be building equity).
Almost everything Mike says here is applicable to the Charlottesville area real estate market, notably that:
- Homes that are less than perfect and would have sold immediately in the hot market, might not now.
- A lot of sellers might be surprised and disappointed when they start the conversation about pricing and putting their homes on the market.
Some of the things I’m reading on this.
- The 2002-2008 period was worse than the data showed due to the exotic loan debt structures of debt back then.
- How long for real prices to recover?
- It’s good that interest rates rose
- In the coming years, cohort analysis suggest that the number of homeowners will grow. Millennials, those born between 1981 and 1996 are a large population subgroup. In fact, approximately 1 out of 5 people (21.8 percent) are between the ages of 25 and 40 as 2021.
- Haus’ June price analysis