The Expert Podcast

So now we've had a few months of higher interest rates — actually a lot higher interest rates — and also inflation. What’s happening with the real estate market? For those of you who may have been on the fence, maybe waiting out the market to see what’s going to happen, now that we’ve had almost half of a year, this really started in January, of a new interest rate environment, a new inflationary environment, and even a new home value environment. Home values spiked up at the end of 2021, even into 2022, and many people are now waiting on pins and needles to see what’s going to happen with home prices — not with home sales volume, but home prices.

Home sales volume really doesn’t mean anything unless it’s changing the price. If you’re a buyer or potential buyer, how many other people buy houses really doesn’t matter. Whether a million people buy houses or only one other person buys a house, the only thing that matters to you is what the price is that you can purchase a home for.

Here are some facts that have come out in the last month or two reflecting on the first quarter of 2022. CNBC reports home prices surged over 20% in March as interest rates also rose. So, there’s your first clue: this is at the end of May, and prices still went up. Interest rates went up, and prices went up. We’ll talk about why that might be the case.

What do people think is going to happen in the future? Well, from the same data, home prices surged 20% — the highest and biggest spike this century. Think about that: interest rates went up from roughly 2.5% to 5.5% — more than double interest rates in the last quarter. At the same time, home prices went up — the biggest spike this century as interest rates went up. That means something, and we’ll get into what that might mean.

Experts — whether or not they’re good or not is a matter of conjecture — say it’s unclear when prices will drop. Talking about prices, not interest rates, when will prices drop? Well, if history is a guide, they never really do drop. Even in the housing crash of 2007 and 2008, housing prices did dip down but very quickly came back up a year or two later. That was because there was a large volume of foreclosures and poor underwriting. That hasn’t happened with this spike. This spike has come from genuine demand and a lack of inventory.

What does that look like? When there’s a lot of demand and no inventory, and you’re a buyer trying to buy a house, will you cry? Half of U.S. homebuyers are crying during the process. This is June. So, if you’re looking to buy a house, it’s a trying time; it’s not a happy time. Getting into a new house should be something very joyful — to get a new home, a place where you can build memories, raise your family, and have a roof over your head that you own instead of renting an apartment.

What does it really look like? In a survey, 61% of millennial homebuyers and 65% of Gen Zers were brought to tears during the house hunt. Sixty percent of sellers reported getting at least two offers, and that was in April when half of the homes went above asking price. Just like we talked about, this is April — not last year. In April, half of the homes sold went for above asking price, even after the interest rate spiked up.

So, what can you do about it? Well, again, there may be a bias here, but Barbara Corcoran, a famous real estate retail company owner and Shark Tank member, says, “Get in the game.” To first-time homebuyers: get in the game. It doesn’t matter if you cry, if the interest rate is high, or if home values are higher than they were. Get in the game. You have to get in with whatever house you can possibly buy.

This is what we talk about on our channel at homesheep.com. It doesn’t matter if the house you thought you could buy in 2018 — the one you had your heart set on, maybe 4,000 to 2,500 square feet on two acres with granite countertops — is now out of reach. There are many other houses that are attainable. Our channel shows those every week. We feature a dozen or so houses that are $200,000 or under all over the country.

According to Barbara Corcoran, you have to have a chip to play in the game and trade up and trade up and trade up. That becomes a retirement fund. Granted, you might say she has a bias because she’s in real estate, which is true. You have to take it with a grain of salt. But just because she’s in real estate doesn’t mean it’s not true.

You really can’t sharp-shoot a real estate market. You have to get kind of close. What you have to do is answer your family’s needs. People just like to own where they live — to hang a picture on the wall, not the landlord’s wall. I’m sure that resonates with a lot of you.

You can’t predict how much higher or lower property values are going to go, but you do need a roof over your head. In the rare, unusual, and unexpected case that home prices go down — which is extremely unlikely — you still have a roof over your head. Look, if home prices go down, and you buy a house for $250,000, and two days later, it goes down to $200,000, it’s not like you have to write a check for $50,000.

You still have the house over your head. You didn’t really lose any money. They’re not going to withdraw $50,000 from your bank account. Your mortgage company isn’t going to say, “Hey, you have to pay us $50,000.” All it means is that, at that moment in time, if you wanted to sell your house, it would be worth less. That’s all it means. Five years later, ten years later, it could be a different story. Ten days later, it could be a different story.

The $50,000 of a perceived reduction in home value doesn’t affect you if you’re a homeowner. Now, if it goes up $50,000, it doesn’t affect you either unless you want to sell it. The only time $50,000 affects you in terms of upward home value is if you haven’t purchased yet and, according to what you see on Zillow, prices just keep running away and getting higher and higher.

The demand is far exceeding how many houses there are to go around. What that means is that, even if the price is high, people are still buying houses. This is the biggest spike this century, even with high prices and high interest rates.

So sure, it may be something that makes you want to cry. That’s only because you’re comparing what you thought was going to happen with what’s actually happening. If you deal with the reality of the market and buy something, there are houses out there.

Even though you may have bid on a house and didn’t get it, there are thousands and hundreds of thousands of houses all over the country that have been on the market for two, three, or four months. They’re out there. The reason they haven’t been purchased is usually something cosmetic.

Many people expect the house to be turnkey: walk in the door, everything’s clean, with granite countertops, stainless appliances, a mowed yard, and fresh paint. That’s why nobody’s buying it. You can buy that house for much cheaper than any other house, and you don’t have to bid against anybody.

Sixty percent of sellers reported getting two offers. But there are houses out there with no offers. You could buy a house today. Granted, it might not be exactly what you want, but that’s why you buy it — because it’s not exactly what everybody wants. You can make it into what you want at your convenience.

So, this is what’s happening in the market for those of you who’ve been waiting to see what’s going to happen. What happened is that prices surged 20% in March.

If you were in January thinking, “I’m going to wait for prices to go down or interest rates to go down,” or wait for higher interest rates to diminish house prices, this is what happened: home prices surged 20%. Experts say it’s unclear when — and they didn’t say if — they’ll drop.

Again, food for thought. Everybody has different opinions. Put your opinions in the comments. We’d love to hear them. Keep your eyes out for our next video with another six houses under $200,000 that would be very, very appealing to a lot of buyers.