Many potential homebuyers today are afraid. Some fear a future where housing prices are so high it will be impossible for them to own a home no matter how much money they make. Others are afraid that prices are rising so rapidly that they must fall soon – decimating the value of their hard-earned investment.
With so many sources sounding off on their opinion of the housing market, how do you know who to trust so you make a smart decision about the biggest investment of your life?
The Importance of an Upfront Market Analysis
At NEO Home Loans, we want you to be comfortable and confident when choosing to purchase a home. A large part of this is educating you on the state of the housing market.
High home prices and heavy competition can be intimidating and give you pause, but if you understand where things were before and where they are heading, you will be more confident in making your real estate investment. Primarily, we want to clear up the false assumption that the real estate market is at a peak and is imminently going to crash.
Here are a few of the main reasons why you can be confident in the stability of the housing market.
1. Inventories are at record lows:
According to Redfin, there were only 823,237 homes for sale in the United States at the end of July 2021 – or 1.2 months’ inventory. That explains why buyers have little choice but to bid up prices.
Homebuilders pulled way back after the last crash, and they never fully ramped up to pre-2007 levels. Now, there’s no way for them to buy land and win regulatory approvals quickly enough to quench demand.
2. Mortgage rates remain near historic lows
After hitting all-time lows in early 2021, mortgage rates have risen a bit — but not much. Rates are still historically low with the average 30-year fixed-rate currently sitting at 2.9%.
3. Demographic trends are creating new buyers
According to the National Association of Realtors, the average American homeowner purchases their first home at the age of 33. If we look at the births underlying each generation we can see that there is going to be a sharp increase of people reaching homebuying age over the next several years.
4. Lending standards remain strict
Before the last housing market crash, lenders offered mortgages to just about anyone, regardless of credit history or down payment size. Today, lenders impose tough standards on borrowers — and those who are getting mortgages overwhelmingly have stellar credit.
5. Foreclosure activity is muted
In the years after the housing crash, millions of foreclosures flooded the housing market, depressing prices. That’s not the case now, as most homeowners have a comfortable equity cushion to protect them from losing their homes.
This trepidation about the future of the housing market has been fueled by the absolute pandemonium we saw over the past year, but the truth is real estate is always in flux. Home prices, interest rates, and market trends evolve daily, and understanding these ebbs and flows can help make you a smarter (and wealthier) homeowner in the long run.
At NEO, we believe doing an in-depth analysis of the housing market is so important that we’ve made it the first step of our Bulletproof Buyer Program.
To be able to leverage all the details you need to make a confident, smart decision in a real estate transaction, knowledge of the current state of the housing market is a must. We want you to feel comfortable and confident when you decide to make an offer on a new home. When you have your initial consultation with a NEO mortgage advisor, they will carefully guide you through the data and help you understand WHY the market is moving the way it is.
Ready to begin your market analysis? Request a consultation with a mortgage advisor by filling out the form below.