How To Win In The Current Housing Market

Our agents have been hard at work on the phones despite all the noise in the media about the housing market. A lot of what we are hearing from prospective clients is “we’re waiting for the market to crash” or “we’re waiting for the interest rates to come down”. It’s this that has prompted me to write this blog post in hopes of educating you the reader on how all this market stuff actually works. 

The Truth About Market Crashes

Here’s the thing about markets that most people do not understand – if by some slim chance everything comes crashing down like it did in 2008 (though it’s highly unlikely) history tells us that the market always bounces back. When you look at the overall trends over the lifetime of markets the trend is always up. If you bought a home in the current market and the housing market crashes a year later, nothing happens unless you panic and sell (assuming you can still afford the payment, of course).

Sure, you might be upside down for a little while but again, history tells us that markets always bounce back and when that happens you’ll be even again and likely back with equity in the home. So if you are thinking about buying a home but are worried about an “unlikely” crash, fear not. If you stay level-headed and remember that markets have always gone up and down but always bounce back, you’ll be fine. In the words of Aaron Rogers, “R-E-L-A-X”. 

The Best of Both Worlds

The other factor to consider if you’ve been thinking about buying a home is the interest rate. Rates are high, there’s no sugar-coating it. The rates are what they are, for the moment at least. Rates though, just like markets, go up and down based on what’s happening in the world. The rates will not stay this high forever. Sometime next year we should start seeing the rates come back down so if you did buy a home now, you could look into refinancing the loan to get a lower rate and in turn, a lower monthly payment. 

Now, you might have read that last paragraph and thought, “what’s the rush? Why don’t I just wait until then to buy?”. It’s true you could wait until the rates come down to buy but here’s the thing: right now, because many people are waiting for either a crash or the interest rates to drop, homes are sitting on the market for a lot longer. Last year a home would hit the market and be under contract within hours, sometimes in minutes but now, homes are sitting on the market for 45-60 days. That’s good for you as a buyer because there is little to no competition and seller’s are slashing prices to get their properties sold. This is what we would call a Buyer’s Market. Lot’s of upside for you as a buyer. 

In this current market you could get a great deal on a home and then possibly refinance the loan when the interest rates go back down. You could have the best of both worlds – a great home, at a great price with an affordable interest rate. You’d just have to be able to afford the monthly payment until the rates go back down. It’s a play that requires long-term thinking vs short-term thinking. 

Economics 101 – Supply vs Demand

So what happens if you wait to buy a home until the interest rates drop? Consider this: once the the rates drop, all of those people who’ve been sitting on the sidelines watching and waiting are going to become active buyers, all at the same time. What happens when you have so many buyers hit the market at once? The supply of available homes can not keep up with the demand of buyers in the market.

When the demand for goods exceed the available supply of those goods, prices go up. In the housing market, this scarcity causes competition for the homes that are available and buyers often end up paying over the asking price to land the home they want. This is exactly what was happening in 2020 and 2021 and even through the first part of 2022 and is the reason home prices rose as much as they did. Low interest rates caused a rush of buyers into the market, the supply could not keep up with the demand, and prices shot up like they worked for Space X.

History show’s us that once the rates do come back down this is likely to cause another mad rush of buyers to the market. If that happens, prices are going to go back up. Additionally, there will be more competition for the available homes and the opportunities for negotiating on price would vanish. As Thanos said, “they will simply cease to exist”. It could be like it was in 2020 and 2021 all over again. 

Final Thoughts

All of that to say this: we’re often fooled by what we see on the news and miss opportunities because of it. Remember the crash in 2008? The media was going bananas and people were afraid but smart people knew the markets would come back and in fact, they bought up tons of stock, homes and businesses at a huge discount. When the markets came back they all did very very well because they understood the game. Granted, some people were in over their heads and needed to sell but those who panicked and sold when they didn’t need to, lost and lost big.

This is your chance to take advantage of the opportunities that most miss. So get out there, go look at some homes and if you find something you love, work with your Realtor to get you the best deal possible. When the rates go back down you could refinance and potentially be in a very good situation.