Many buyers have asked me this question lately or made the comment "I'm going to wait until prices come back down. It feels like it did back in 2005" While this may seem like an accurate statement, here's why most experts would disagree.
1) Inventory is still very tight as is lending. If you have undergone the mortgage approval process in the last two years you may equate it to the most rigorous colonoscopy you could endure only the mortgage approval is a financial colonoscopy. Every detail of your financial portfolio is scrutinized, verified not once but twice typically, and proof that you are who you are and you have what you have is paramount to being guilty until proven innocent. W-2 earners have it a little easier, but if you are an entrepreneur, have non-traditional income (annuities, dividends, royalties) or are retired, then brace yourself for the full examination. You may require therapy once completed.
2) The economy is strong. The United States is experiencing the lowest unemployment rate since the 60's. This means the likelihood of a significant change in income is no longer a threat to existing home owners thus exacerbating the inventory shortage.
3) Prices are stabilizing. After a five year sharp incline, prices are beginning to stabilize across the country. Most markets have experienced a much slower gain year-over-year than prior years. For the Naples area for example, most of our inventory hit the highest prices with fastest sales in 2015 in most segments.
4) Builders are still building and would do more if they could procure land, labor and affordable materials. Everyone wants to make a profit. Builders are not as excited to build in areas or at price points which minimize their returns. Although the news highlights the lackluster housing starts, the builders are not the problem and are still ahead of year-over-year numbers.
5) Interest rates still going up. Do you remember interest rates above 6% back in 2005? We haven't even come close to that yet although we may be there next year and there are no signs of relent of the upward climb. Since 2014 interest rates have been increasing steadily after declining for almost a decade. Interest rates will continue to climb as long as we have low unemployment and a strong economy. Even with yesterday's drop of nearly 800 points in the NASDAQ, interest rates remained unchanged as there was no need to react to what would seem a deviation from the stock market current trend simply because the economy is sound.
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Sources:
1) nar.realtor
2) https://money.cnn.com/2018/06/01/news/economy/may-jobs-report/index.html
3) nar.realtor
4) https://www.nahbclassic.org/reference_list.aspx?sectionID=819&channelID=311
5) http://mortgage-x.com/general/national_monthly_average.asp?y=2018
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