You’ve been hearing everyone talk about how the housing market is going to crash any day now, it’s just a matter of time. But why hasn’t it happened yet? Why haven’t prices tanked? Mortgage rates are up and inflation is out of control? So, what’s happening?
In order to understand why the market hasn’t crashed yet, we have to take a step back and look at a bunch of different economic factors.
7. Baby Boomers
The massive retirement of the Baby Boomer generation, who have worked, saved, and invested their whole lives, is leading to a significant number of individuals retiring with cash and moving to warmer climates, lower-tax areas, and better lifestyles. The fact is that you are competing with individuals with a 10, 20, or 30 year head start on their finances.
6. Low incentive to sell
Homeowners with low-rate mortgages have little incentive to sell, leading to fewer houses being put up for sale, thereby reducing supply.
You are going to have a difficult time convincing someone with a 3% mortgage rate to sell their home when we are seeing rates hover around the 7% mark.
62% of mortgage holders have a rate under 4%.
The number of houses for sale continues to shrink, causing an imbalance between supply and demand. Limited options and high demand drive prices up.
5. People are being Priced Out of the Market
Prices have skyrocketed and people have decided to rent while they wait for home prices to come down. But there is another part to this story. It’s not just the home prices that are keeping you out, it is these insane mortgage rates.
The combination of high home prices and elevated mortgage rates creates a double burden for potential buyers. Affordability becomes a major challenge, as even with steady incomes, the cost of homeownership becomes increasingly out of reach for many individuals and families.
4. There Just aren’t enough Houses
The slowdown in new home construction compared to the number of households formed has resulted in a shortage of housing units. The market is struggling to keep up with demand.
Currently, the housing market is short 6.5 million homes.
Until the construction of new homes catches up with demand and closes the gap, it is unlikely that we will see a significant downturn in home prices.
3. We are in a Seller’s Market
A seller’s market occurs when the monthly inventory of houses available for sale is below 6 months, indicating a high demand for homes relative to the supply. In contrast, a buyer’s market occurs when there is a monthly supply of 6 months or more, indicating a higher supply of homes compared to the demand.
In the case of Dallas, the city is currently experiencing a seller’s market with a monthly inventory of around 3 homes available for sale. This low inventory level indicates a strong demand from buyers, creating a competitive environment where sellers have the advantage.
On a broader scale, the United States as a whole also reflects a seller’s market with a monthly inventory of 2.9 months. This means that there is a limited supply of homes relative to the demand, leading to increased competition among buyers and higher prices.
In a seller’s market, home prices tend to remain stable or even increase due to the imbalance between supply and demand. With fewer homes available for sale, buyers are willing to pay higher prices to secure a property, which contributes to the sustained strength of the housing market. As long as the demand remains high and the inventory remains low, the likelihood of a housing market crash and significant price declines is reduced.
2. Prices are All Over the Place
Home prices can vary greatly depending on the location. While some areas may experience price plunges, others see significant price increases, creating a fragmented real estate market.
For example, some cities in Florida are seeing 15, 17, and 19% increases in home prices.
The same is true for Texas and other Southern areas.
Contrast that with the decrease in home prices on the west coast in states like Oregon, California, and Washington that have seen prices decrease by as much as 10%.
1. Interest Rates
The number one reason why we haven’t seen an increase in the supply of houses is the towering mortgage rates.
According to Ben Carlson, the sharp uptick in mortgage rates has significantly slowed housing activity. While inventory levels briefly spiked, there continues to be a dire shortage of homes on the market. Homeowners are reluctant to sell and lose their low fixed rates, leading them to opt for renovating their current homes instead.
However, as Carlson points out, there may come a point where some homeowners are forced to sell, potentially creating more inventory. Additionally, younger generations may become more willing to sell their homes despite high interest rates.
Nevertheless, for there to be a significant surplus of homes on the market, mortgage rates will need to cool down. Even if rates drop, a major housing market crash is unlikely, with Carlson predicting a more gradual decline, often referred to as a “slow burn.”
Buy When the Time is Right for You
As you can see, Dallas is not alone in experiencing a healthy housing market. Hopefully, these seven tips show you that many of the Youtube Real Estate Gurus and so-called experts, are misinformed. The housing market hasn’t crashed like they said it would.
The most important thing to remember when buying a home is whether it is the right time for you and your family. And that is what the Living in Dallas Texas Team is here to help you determine. So whether you are moving in 9 days or 90 days, let us help you make your smooth move to Dallas.