Is the sky falling on real estate?
Updated: Jun 28, 2022
Listening to the media these days, you might think so. I'm hearing tons of stories about the rapid rise of interest rates, a looming recession, the huge run up in prices in the wake of the pandemic, etc, etc.
But real estate, like other markets, is driven by fundamental market forces. The fact is, we've been in a seller's market with rising prices for a decade or more. That's because of big trends that have been underway for some time. Since the market correction of 2009, homebuilders haven't been building enough houses. Millennials are now at prime home buying age. While rates have recently risen, they are still low by historical standards.
Take a look at this chart, which shows the number of months supply of houses available to buy, broken out by home price tier. Nationwide, 6 months of inventory is considered a balanced market. Aside from a few blips in the luxury home market, we haven't been at that threshold for at least 10 years.
Yes, I do think the market is shifting, but not as rapidly as some are forecasting, especially in the Northeast. This is still a great time to sell. And it is also now a better time to buy than at the market's frothy peak because some buyers are now sitting on the sideline.
Here is more information from the AEI Housing Center: