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The Housing Market Rush

Posted on July 20, 2021 by Allen Brown

The COVID-19 pandemic was a black swan event. No one predicted that 2020 would be the year the global economy would come to a screeching halt. Suppliers and manufacturers were devastated by the lockdown. Certain areas of the economy were devasted by COVID-19, while some areas were buoyed by the pandemic. The real estate market was one of these markets. Housing prices jumped to record highs in 2020. 

The housing market was officially on a sugar rush. This sugar rush was the result of a thinly stretched market. Real estate demand soared during the pandemic spurred on by low interest rates. Sellers were in control of the market. Buyers were forced to go to extreme measures to stand out in the overcrowded buyers market.

Housing shortage

The housing craze that occurred in 2020 began before the lockdown. Housing construction and permanents have been on the decline since the 1980s. Multiple factors play into the declining supply of entry-level homes. The ’80s saw an increase in mortgage rates, dampening demand for new homes. The ’90s saw a slight increase in new-entry level houses built, but for the most part, the supply of entry-level houses has been weak. 

The reason for this deficit of entry-level houses ranges from a lack of workers, a lack of developers, to strict regulations. The shortage of workers is so extreme that 80% of companies surveyed said they were understaffed. The halting of the global economy in conjunction with the already thinly stretched housing market created the perfect storm. The housing craze was born. Buyers were forced to go to extremes to outbid the next buyer. New house owners were forced to pay thousands over the asking price in some cases. 

During the high of the craze, buyers were so desperate to close on some houses that they failed to thoroughly inspect the property. Many buyers experienced buyer regret and were left fixing expensive repairs or were forced to move. There’s plenty that can wrong when purchasing a home. The house could have a hidden infestation, and on the extreme end, when dealing with older properties, there could be squatters on the property. You would have to inform yourself of squatter rights in this situation.

Why you should invest in a house

Investing in a house versus investing in the stock market or bond market has some benefits. Purchasing a house for investment purposes gives you the ability to create a steady cash flow, creates a safe investment, and provides tax benefits. Renting out your property allows you have a steady cash flow. Renting can have its ups and downs. You’ll have to deal with a tenet and the possibility of property damage. 

Just deciding you need a house instead of renting can add money to your pocket. If you periodically maintain your property, the value of your house is guaranteed to increase. There are black swan events that could occur, such as wildfires, flood damage, or fallen tree damage. But this is why it is important to keep these factors in mind when filling out your home insurance information. When it comes to large assets like a house, it is a must to take the time to calculate what will work for you and to read the fine print in your insurance plan.

Why now is the perfect time to purchase a house

Maybe you have been thinking about purchasing a house or investing in the real estate market. Interest rates are still at an all-time low, making it the perfect time to enter the market. Mortgage rates have been on a steady decline since 2018. Mortgage rates fell to 2.88% in July, and although rates are expected to slightly tick up in 2022, the rates are still at an all-time low. 

These rates will not be available forever. The feds are looking to keep interest rates at the current level until 2023. Mortgage rates tend to follow the same trend line that interest rates set. Once the feds increase the feds fund rate, it is expected that mortgage rates will increase. On the bright side, now that the country is open again, manufactures and businesses are attempting to resume regular operation. The housing supply is expected to increase and housing appreciation is expected to slow down. The real estate craze of 2020 is officially over making it the perfect time to purchase a house.




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