The Expert Podcast

So, our housing price is going to go down. You will see many articles in the major news financial papers and the local news broadcasts saying the real estate market is going down and real estate sales are slowing. Don't confuse a sales rate for property with prices of property. For example, if in your area they sell a thousand homes a month and next month they sell 800 homes, you could say that the real estate market went down 20% or home sales went down 20%. That just means that the number of homes sold went down 20%. It doesn't mean anything about the prices. We'll talk about prices in a moment.

By the way, put some comments below and let us know what you think about these questions or what you're seeing in your market. Let's say that home sales in your area are at a thousand houses a month, and all of a sudden it goes down to 800. That could mean that the market went down 20%, but did the prices go down? Sometimes, when the number of homes sold goes down, the price actually goes up, even though you might think supply and demand would suggest otherwise.

If the reason that the volume went down is because the prices got higher and fewer people could buy, that might explain why the volume reduced. For example, if the houses in your neighborhood sell for $450,000, and at that price, a thousand people a month want to buy those houses, but now the price goes up to $525,000 for an average house, fewer people may want to buy these houses because they can't afford it. The payment is too much, or they don't think it's worth it and feel it's overpriced. Now only 800 people want to buy that $525,000 house. The price, in this case, is what reduced the volume.

When you see news articles saying the real estate market went down or real estate sales went down, don't confuse volume with pricing. In many cases, supply and demand mean that when volume goes down, pricing will also go down to try to chase the market. But in this environment, we're in an inflationary market—a supply-side deficit market with not enough houses to go around. Basically, that reduced sales volume might actually increase prices, or increased prices might be the reason sales went down.

If you really want to know what's going on with prices, look at the prices. Sure, there will probably be more reductions in price on Zillow, Redfin, or elsewhere than there have been before. However, the initial prices were probably higher than before. Whatever the selling prices are today, if you look at houses that are actually sold, closed, settled, and moved into, the prices of those houses compared to two or three years ago are still going to be 40%, 50%, 60%, or even 80% higher than they were.

The prices are not going down yet. They may never go down. At this point, the actual price strike points are not reducing—only the volume in some areas. It's still early; it's only been a week or two or three where people are measuring volume declines. So far, there's no evidence to show that prices are going down. In our opinion, the prices aren't going to go down. They may not go up as fast, but they may go up faster because of the "lock-in effect." People who already have houses with lower interest rates don't want to sell them, so there may not be enough houses to go around, or the only way it's worth selling is if you can make a big profit or a big score on them.

New houses can't go down in price because the building costs and construction fees are higher than they were. So, keep an eye on the prices, not the sales rate. Let us know what you think in the comments, and we'll see you in the next video.