Housing Update August 2023

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Hello and welcome or welcome back to the channel, wherever you are viewing this video. Thank you for spending a minute here with me. Home prices! There’s so much misinformation out there right now. Whether you should buy not is now the right time? Are we gonna see home prices go down? Is it too expensive to purchase? There’s a lot of talk that in most major metro areas, it is less expensive to rent compared to buying. And in most cases, comparing month to month payments, your overall rental payment compared to what buying with, say, minimum or moderate down payment at the average purchase price in a given area, what that would amount to, yes, overall more expensive. But I think right now we really need to ask yourself the question, where are we gonna be at five years from now, 10 years from now?

What is my monthly payment on rent gonna be? Then how about a mortgage? And in the long run, unfortunately, I don’t foresee things getting less expensive. It’s expensive to own a home right now because rates are up, but when rates lower, that’s gonna cause more competition coming into the market. We’re gonna see home prices get bid up higher. So an average home price here in California, around 800,000, will be 850 or 900,000. Most of the experts out there or the companies that are really putting forth guidance and predictions in terms of home prices, whether it’s Zillow, BlackRock, Redfin, uh, the National Real Estate Association are projecting anywhere between five and 10% year over year appreciation for the foreseeable future, the next three to five years. And when you’re talking about an $800,000 home with that type of appreciation, five years from now, you’re now in the million dollar range.

So if we see interest rates lower in the future, you might have, let’s say, a comparable monthly payment to what you’re gonna be paying now. But with that higher home price, that’s what’s gonna make it comparable. So if you’re able to buy into the market now, yes, pay that higher interest rate. Well now in interest rates lower in the future, you have the opportunity to refinance at the lower rate. But now at say, today’s home price, we’re anticipating that’s gonna be lower and that’s gonna provide that long-term savings, you know, compared to buying in the future. And we compare that to rent with the lack of inventory we have across the housing industry, whether you’re looking to purchase, whether you’re looking to rent, I think we will continue to see rents get bid up. And that’s why I started with asking, you know, yourself or kind of asking the question, where am I gonna be at five years from now? Where am I gonna be at 10 years from now? If I’m not buying now, then when am I in a position where I feel my rent’s going to not change, I feel comfortable with the landlord? Or potentially, am I gonna have rental increases? Am I gonna need to move maybe due to family size in the next few months? We have a lack of inventory across the nation, certainly here in California and across the nation. You know, year over year we’ve had, uh, about 1.2 to 1.5 million housing starts. That that’s good. That’s more inventory coming into the market. But right now we have a lack of inventory in this market of about 5 million. We have to keep in mind that we have had about 2 million household formations and when you compare that to the 1.2, 1.5 million housing starts or inventory that say gonna be coming into the market, those numbers just don’t add up. We already have a lack of supply of 5 million. Great. We’ve had a 1.2 to 1.5 million housing starts, but when you have 2 million household formations, those numbers just are not going to catch themselves up. And that’s why even though we have higher interest rates right now, we’re not seeing home prices go down, just pure supply and demand. There’s an awful lot of demand in the market. There’s demand that will continue to come into the market with these household formations and the inventory homes for sale homes available to rent that, that inventory, it’s not looking like it’s going to catch up here anytime soon in, in the next several years. And I really don’t foresee it changing. I think we’re gonna be in an environment where if you’re not able to purchase here in the near, in the near future, if those numbers are not making sense for you, unless you have a major financial change, whether it’s larger down payment, a great increase in the income, and you might find yourself out of the home buying housing market in general.

I’m happy to chat further on this. There’s, there’s so much surrounding this. I think bottom line is I don’t foresee things getting less expensive monthly payment wise compared to buying in today’s market. So reach out if you have questions. Wanna chat further, I’m here to help. Uh, I’ve been a mortgage lender for almost 20 years, a real estate investor for about 15. Bought and sold several properties. I run a few Airbnbs. So happy to chat about this. Take care.