Waiting for a Real Estate Bubble Burst?
There’s always a Chicken Little out there, ready to run around yelling “The sky is falling! The sky is falling!” but let me put your fears to rest: We don’t anticipate a burst bubble in the real estate market. For those of you who still wake up in a cold sweat at the memory of the Great Recession, let me give you extra reassurance. This recession and explosion of real estate activity are NON-ECONOMIC in nature. This recession was caused by Covid, but we’ve quickly recovered in most cases.
In real estate there’s a natural swing between “Buyer’s Markets” and “Seller’s Markets” and it’s all a function of supply and demand. More supply than demand? You’re in a Buyer’s Market where buyers can snap up great properties at lower prices. More demand than supply? You guessed it. That’s a Seller’s Market where sellers are getting premium prices as buyers pay more to beat out the competition.
When Covid-19 cases first shot up in the U.S, activity quickly came to a halt as everyone stayed home and we expected to go into real estate’s version of radio silence - but that didn't happen. Like so many businesses and industries, we learned how to operate safely and business resumed. And what a business! As school and work adapted to the virtual world, people discovered that they were free to live wherever they wanted.
Families went from city to suburb or felt a need to move closer to their relatives and bond as a support pod. People moved from tight urban zones to rural areas with space to stretch their legs. With days on end at home, people came to realize that they needed a home that was a better fit for their needs - and they didn’t wait to make a change. Also, those with means decided it was time to pick up a second home so they could enjoy some variety.
Meanwhile, some of the homes that would have normally come up on the market for sale, didn’t. Feeling uncertain and experiencing less mobility, many people held onto their properties and stayed put. The demand for properties and the lack of inventory are continuing to drive up prices. As long as available homes for sale stay slim, then we will continue to see increases in prices. We are NOT seeing an easing of demand at this point.
Interest rates are another aspect of this hot seller’s market. As long as interest rates remain historically low, coupled with the lack of inventory, we do not anticipate a burst bubble.
We are anticipating a rise in housing inventory with vaccines rolling out and sellers becoming more comfortable selling. The effect this will have, if any, will be an increase in the homes available for sale. According to the rule of supply and demand, this can mean an easing of prices in the normal see-sawing of Seller’s Market to Buyer’s Market, but there’s something you should know...
There is a backlog of buyers waiting for homes that need a mortgage. At the height of the buying frenzy cash has been king, winning out on most transactions and leaving people who want to buy with a mortgage as a second or third, or fourth choice for sellers. More inventory from sellers, plus more demand from buyers financing their home purchase with low-interest rates equals a great opportunity for both Sellers and Buyers to get a great deal.
It’s never been a better time to buy OR sell! I can walk you through the process and give you the insights you need to get the most out of your real estate transaction in Palm Springs and the Coachella Valley. Out of the area? No problem! Call me and let me refer you to a top-notch professional in your neck of the woods. I’m Stephen Burchard, The Desert Bowtie Realtor, taking the (k)nots out of real estate.