It seems these days that everyone has a prediction for what the future holds for the real estate market.  Some say that rates will come down, some say house prices will come down as well.  I think potential buyers hope both are true.   The reality is that nobody really knows.  We make predictions based on past cycles, and indicator reports, but what really happens is totally unknown and we won’t know until we get there.  All we really know is what is going on right now because something could happen at any point that could change the market’s direction for the better or worse.

We all hope rates come down, which would be better for buyers who get into contract, but keep in mind that lower rates will pull more buyers into the hunt and heat up competition for the limited homes on the market, which would put upward pressure on prices.  Buyers want prices to come down, but a sudden drop in prices would probably put sellers back on the fence which leads to lower inventory and thus puts an upward pressure on prices again.  It’s a delicate balance.  Any sudden movement one way or the other could have unforeseen consequences that may change the market in a way that isn’t great for one side or the other.

I asked the question my buyers last week: “would you rather have higher rates and less competition?” OR “lower rates and more competition for the house you want?”  I think it’s important to think about this.  We don’t have control over rates, but it would be good to think about how this dynamic works.  With the limited inventory, lower rates pull too many buyers back in, and higher rates put some buyers back on the fence which means you may get the house you offer on.  I think it would depend on how much higher the rate is and how much it impacts your payment, but this is good food for thought for buyers right now.

To add to the equation, I think there is potential for rates to get low enough to pull buyers and sellers back to the table, which may lead to a more stable buyer/seller dynamic.  That rate is in the mid 5% range, and we are not there (or even close) yet.  But that is my prediction and as I stated at the beginning of this, we have no idea what the future holds, so a lot could happen to change the dynamics between now and if we got rates in the mid 5% range.

A personal example:  I bought my current house in late 2019. The market was due for a pullback, rates were expected to go from the 3% range to the mid 4s (which sounds like a deal these days) and cool the market off a bit.  I thought I was overpaying for my house by about 10-20K, but I needed to buy it at that time for a few reasons.    Fast forward to spring of 2020 and now we have the Covid pandemic starting, and we all know what happened to house prices after that.  I had no idea this was what the future held and my decision that I thought was a rushed one, ended up being a well-timed one.   If I had rented rather than bought, I would have missed out on a ton of equity.

With today’s news cycle being what it is, we never know what is coming around the corner.  Hopefully it’s a period of blissful peace and tranquility or maybe just some “normalcy” (whatever that is these days), but it is more and more likely that it’s something we didn’t see coming that could have a major impact on the US or World economy.  We won’t know what it is (if anything) until it happens.

The key point I want to make is be careful putting too much stock in predictions.  Home prices could go on another run at any point, and they already seem to possibly have bottomed out and are starting to climb at certain price ranges.  Rates follow the economy and are expected to come down but may not.  Sellers may stay glued to those 3% rates and that will keep inventory tight through the summer.  Hopefully enough of them decide to let go and we get a steady new supply to try and match the buyer demand.  There are a lot of “What if’s” right now and the headlines love to sensationalize any little bit of info to make it seem like the bottom is falling out.  The reality is real estate is the best long-term investment over time and there is only so much of it.  If you can afford to buy, you will make money in the long term. If the prices are out of reach, then the best thing you can do is keep building your savings to be able to buy at some point in the future.  Nobody has to buy a home, just like you don’t have to invest in a 401K or IRA plan, but it’s a good idea if you can afford it.  The reality of now is all we really know about. We can try to predict the future, and some will be right, and others will be wrong.  Don’t get caught hoping for something that never materializes.

If you have questions reach out to me.  It doesn’t cost anything to run numbers and it’s best to be prepared for when the opportunity presents itself.  That’s where I come in.  Let me guide you to the top of the homeownership mountain.  I don’t sell, I educate and assist. Apply here  I hope this was helpful.