The Expert Podcast

Neither buyers nor sellers are going to be happy about what's happening with the real estate market If you're a buyer that's been on the fence waiting for real estate prices to go down Obviously you're not seeing that happen And most experts say it's not going to happen We'll get into the reasons why But also sellers You're not going to be happy either Because the ability to sell a home in this market It's also going to be more difficult Nobody in the real estate industry is going to like the next 24 to 36 months Because if you're a mortgage broker you're not going to be happy either because you're going to be doing Much less in terms of business almost down to zero If you're a realtor selling homes You also are going to see your sales volume and your commissions Reduced dramatically Anything in the real estate industry Has a lot of headwinds Let's take a look at why First of all here's an article from MarketWatch talking about that There's weakness in the housing market Now when you hear weakness in the housing market if you're a buyer you might think Hey that's great Home prices will go down Maybe I can get a deal Maybe all this Spiking Balloon bubble of house price is going to go away It'll go back to what's called normal It's one of the questions we get a lot is one is the housing market kind of go back to normal when our home prices Kind of go back to normal And sure it says right here buyers are officially spooked By rising interest rates Now I'm thinking about that For the last two years Home prices went up And until interest rates spiked Nobody was spooked about the home prices Even when homes were two or three or 400,000 higher than they were a year or two before there was still A line out the door of that house to buy the house
Homes that were 40 50 60% higher than they were a year ago Had multiple offers 15-20 offers Sometimes the offers came in Tens or hundreds of thousands Above the asking price So the price is not what spooked Buyers Cause that Has been there for awhile Interest rates are spooking buyers
Because it affects the Mortgage payment that you have And interest rates sometimes as psychologically more impactful To a buyer Then the selling price But it's not going to lower the home Price Level And here's why There still is an inventory problem And the inventory problem is going to get worse Yes there will be more people Who are potential sellers That thought about selling for the last year year and a half two years and maybe held back because they saw prices going up And they figured let me wait a little while longer And I'll get even more for my house Now some of those sellers are coming out into the woodwork because there is some fear That the home values will Deteriorate will go down So more houses are coming into the market from that Component of the people The problem is Normal sellers Who want to move from one house to another Are now locked in Because if you have a mortgage that's two or 3% interest And now you're facing almost six to buy a new house You're probably going to stay put
Because even if you do want that new house and you can get a lot of money for your Current property
You're not gonna be able to make up the difference on interest rate On your payment So a lot of buyers are going to stay put And for that reason many experts say don't expect a real estate crash
Here's why buyers are saying they're pushing off plans to purchase by six to 12 months So if you're a buyer You're probably thinking the same thing Well wait a minute Let's see what happens with this market Let's see if it goes down a little bit Let's see what happens with interest rates Interest rates went up Maybe they'll stop going up Maybe they'll go down Maybe I'll get more income All of these factors are conspiring against everybody Who has an interest in real estate If you are a seller You're not going to have as many buyers out there because they're kind of fading into the woodwork Because of interest rates at the same time you will probably have more Competition Of houses on the market
So that's selling price that you were thinking about getting Based on your neighbor's selling their house based on Zillow based on anything else You can put it out there for that selling price but it may take a while For the transaction to happen homes are sitting on the market longer than they were but And this is huge The prices are not going down now There may be some price reductions on Asking prices or listing prices But those reductions are from an inflated higher value not from like a 2019 or 2020 price in fact The prices that are being asked even after the reduction is still much higher than they were a year ago 2021 even the beginning of this year
So there's a perfect storm Of supply and demand where supply is going away Because people can't sell their house Because they have a low mortgage rate and going into a new house it's just going to Get them into a higher rate on their mortgage You can't move your mortgage with you If you have a two and a half percent mortgage you can't move that over to your new house Your new house is going to have a five and a half or 6% mortgage So Inventory is kind of go down The same time the number of buyers
Is also kind of go down Because of the interest rate being higher And the house prices have gone up So what that's going to do The volume of sales will diminish tremendously The sales volume You'll see that reported on the news Real estate sales are down But that just means that the number of homes being sold is lower It doesn't necessarily mean the price Is lower And that's what you have to look at Realtors are gonna have a tough time doing the kind of volume that they did For the last two three years because there were multiple offers on houses 10, 15, 20 offers Now Here's another reason that the price is also not going to go down Those 10 or five or 20 people that bid on houses in December January February Over the last year They're still out there Most of them didn't buy a house Only one of those 15 people got the house If there were 15 bids on the house only one of them got the house 14 did not get the house
So those people are still lurking They're still out there in the marketplace So inventory will be absorbed At a lower level But the price point won't go down because as soon as there's any house that's in the market that's reasonable The house is going to get sold So the price won't retreat it may not go up as fast but gradually as buyers start to see okay that's the price point It's not going down I can calculate the mortgage on this interest rate The ho the home Transactions will continue It's not going to crash like it did in 2008
It will stay At a reduced level but every house that's available will eventually will get sold There may be A more traditional turn rate 40 50, 60 day inventory rather than two week inventory But the homes will all get sold A house that's Decent enough to live in is kind of get taken off the market Somebody is going to buy that house eventually You're not going to have to discount it back to 2019 2020 prices
It may not go up to another 10 or 15% increase like it did last year But that price level is kind of ratcheted in And then the balance of supply supply and demand will kick in and buyers and sellers will meet in the middle Let us know if you think in the comments
Tell us about your experience looking at houses If you're a mortgage broker what are you seeing for volume Most of what we hear is that the volume is way off It's already 30 40% off Some places are half the volume It was we expect by the end of the year it'll be less than half of what it was in 2020