#031 Home Prices Are Skyrocketing! Will There Be A Crash Soon Like 2008?

So what is happening? Well since the pandemic began, the number of people looking to sell their home has gone down and the number of people looking to buy has gone up dramatically.

In classic economics, this is the whole supply/demand thing.  

More people want to buy houses and there’s not a lot on the market so people selling their homes are getting CRAZY offers the day their house hits.

What happened is that as big cities shut down, people realized they didn’t want to be stuck in the city anymore and are moving to more open areas. The other part of this is many people have jobs that will involve them working from home whereas before they had to go to an office. This is making people want bigger houses with dedicated workspaces. 

So as gravity likes to say, what goes up must come down. The same is true in valuations. We know that the housing market will correct, the questions are when will that happen and how bad will the correction be?

The answer is no, I don’t think we will see a housing crash. Will prices stop increasing at breakneck speed? Yes. They’ll likely slow from the 3-4% quarterly appreciation we’ve been seeing to closer to 1%, which is still very good for real estate. 

So here’s three things that are going to likely make this all play out.

1)    Interest rates – The Federal Reserve will most likely increase interest rates by the end of the year by up to half a point. This means that people will pay more for their loans from banks. That still puts us under an average 4% loan which is historically ridiculously low, but it will still cause things to cool.

2)    Housing Supply – more houses will be hitting the market around September 21 for two reasons. The first is that the moratorium on being able to evict people behind on rent/mortgage payments will be up. Lots of rental owners are sucking wind after having tenants who won’t pay because they don’t have to and they will be forced to sell. This will also increase as housing construction continues to increase as more people get back to work and supply chains are fixed.

3)    The Great Resignation – an overwhelming amount of people (over 40%) said they will begin searching for a new job at the end of 2021. Many organizations have mismanaged their workers or are requiring them to come back into the office and they don’t want to having got used to WFH life. That means there will be a lot of people willing to relocate in order to improve quality of life which could mean both, more demand and more supply.

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If working a 9-5 for 60 years so you can retire with a little money and die a few years later is what you want to do, then this is not the podcast for you.

Stephen is an executive coach that works with executives and entrepreneurs to build the life that they want, personally and professionally.

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