We have heard much paranoia surrounding the real estate market, and whether or not there will be a housing market crash. The problem is, most people are listening to the panic and paranoia without listening to the FACTS!
I have found a great video by financial guru, Dave Ramsey, that explains the FACTS on the real estate market that we are in right now!
This video is about an hour long, so I thought I would also give you a cheat sheet to the things that Dave highlighted in the video.
Current Real Estate Market Facts, as Told by Dave Ramsey:
- In 2020, home prices increased by 29%. In 2022, home prices are expected to rise by 8%. In 2023, economists are predicting home prices to increase by 3-4%.
- The average increase in residential real estate prices has been 3-5%, for the past 50 years.
- What drives home prices? Supply and Demand. Period. Nothing more, nothing less.
- There is no direct relationship between home prices and interest rates.
- Supply has to exceed demand for home prices to go down. When demand exceeds supply, home prices will go up.
- We have had a shortage of homes for the past two decades.
- In 2007, there were 3.7M homes for sale compared to 800,000 homes that are for sale today. We have approximately 1/4 the supply of homes now than we had in 2007.
- US foreclosures were at their highest in 2007-2008 (increasing supply), while at the start of COVID a moratorium on foreclosures had began (lowering supply, due to having no foreclosed homes hit the market). While foreclosures are starting to come back to market, we have a backlog of 2 years worth of homes that need to be foreclosed on, so these homes will be slow to come to market.
- Mid-30s is prime buying age. In 2007-2008, people of that age were Generation X, compared to now Millennials are at the age to start purchasing homes. There are 5 million more people of prime-buying age now, than there were in 2007-2008 (increasing demand).
- Compared to 2007, we have 12 million more households in 2022 (increasing demand).
- In 2007-2008, we also had almost 0% of buyers as institutional investors purchasing homes. Compare that to 26.8% of institutional investors that purchased homes in Las Vegas in Q1 2021 to Q1 2022 (taking out over a quarter of the supply of Las Vegas homes)
- Why won’t we see a crash? The supply of homes has, except for 2007-2008 when we had different economical circumstances, always been lower than the demand. This drives home prices up.
- Although list prices are going down, the value of homes are staying. The past few years we have seen bidding wars that have jacked the prices up way past their actual value, now with less buyers coming to the market, these home prices are coming back down to value. Homes are not losing value, instead the market is finally coming back down to normal.
- What goes up, must come down is NOT an economical principle. In fact, data proves that homes have always seen a relative increase in values over time.
- Recessions have never caused home prices to go down. In 2007-2008, the housing market is what CAUSED the recession due to so many people purchasing homes that could not afford to purchase, not the other way around.
Whether you like it our not, the market is stable and experts do not see a crash in sight. You can keep waiting for something that may never come, or get in early and purchase a home at a price that is affordable to you before the values increase beyond what you can afford.
Check out the Dave Ramsey video below, where all of the facts above are proven based on data:
Dave Ramsey Real Estate Reality Check Video
Call me today if you are ready to buy or sell, or if you would like to talk more about the real estate market!
Now may not be your time to buy or sell, that’s okay but don’t listen to conspiracies, listen to the facts and purchase or sell a home when it is right for YOU!!
