Market Update September 15, 2021

REAL ESTATE MATCH UP: BUBBLE VS SHORTAGE

Those who are expecting a real estate bubble to burst any day now might have to wait a good long while. Despite forecasts that our run-up in housing prices is about to pop because prices are propped up due to low interest rates and wealthy remote workers. I believe our incredible housing shortage will be a key factor in keeping prices robust despite any hiccups we might see.

Right now we have a massive 5.24 million shortfall of homes. This is calculated by extrapolating that between 2012 and 2021, 12.3 million new households were formed (A household formed when someone gets out of a shared living arrangement, e.i. roommates or living at home with parents), but only 7 million new housing units were built (both rental and owner occupied).

The pandemic actually curbed and removed households altogether as younger folks moved back in with their parents. When we ultimately reopen these individuals will go back out into the market and drive an even bigger supply crunch for real estate.

At the moment we are experiencing a buyer freeze as buyers are increasingly becoming resistant to higher prices. This is causing prices and inventory to level… however, pending sales are still up. If we can extrapolate that the shortage won’t be resolved in the next few years, and the Fed keeps interest rates low until well into 2023, then we should see housing prices remain relatively steady or even continue to trend up.