Welcome back to the second part of the State of the Real Estate Market 2020. If you have not seen the first one, be sure to watch it on my Youtube Channel or on my Facebook Page. I covered some thoughts on why is the real estate market unexpectedly hot even during a pandemic.
Now let’s get into the real important question….where will the market go? Obviously, I don’t have a crystal ball and I cannot predict the future. However, based on some market numbers and logic, I can speculate. You may agree or disagree but these will be my opinion.
Do I see the market cooling off the end of the year or early next year compared to it is now? Probably. Why? Again this goes back to the interest rate, supply, and demand.
I do see the supply creeping up in the coming months. With the eviction moratorium still in place, some landlords may have not received a single payment of rent since March of this year. That is more than 6 months without the rent to cover for their mortgage. Other than professional investors, how many casual investors can really afford to not getting paid on their rent for 6 months or more? We have also been seeing layoffs in the job markets and if there is a second wave of outbreak, we may be seeing more people losing their jobs and not being able to pay their mortgages.
You may now be asking…..so Jack you are telling a wave of foreclosure are coming, Are we going to see 2008 all over again? My answer is most likely not at least not in the immediate future.
The housing market plunge of 2008 was caused by an imbalance in the supply and demand fueled by foreclosures. For every buyer on the market looking for a home, there were 18 sellers trying to sell their home. Today, for every 1 buyer on the market looking for a home, there are 2.15 sellers trying to sell their homes. You can see there is a huge discrepancy between the ratio of buyers and sellers on the market now vs 2008. Buyers back then had a lot more homes to choose from so if a seller wants to get their house sold, they had to lower the price. That is what is causing the price to crash.
It is true that we may be seeing foreclosure activities increase thus more sellers on the market. The lenders actually had been really careful about who they lend their money to in the last 10 years. Most homeowners put down a relatively large down patient when they purchased and are sitting on a good chunk of equities. In fact, home equity is at a historic high level throughout the USA. Now if you have a lot invested in your home, you are not going to just give it back to the bank and walk away.
Between the equity invested and the tight inventory, can you see how a crash is not likely?
There are a lot of factors that come in the plan too of course. For example, if the interest rate goes up, we will see buyer demand drop and moving the market towards a buyers market and that will cause the price to soften.
So if you want to stay connected with what is going on in the market, be sure to like my Facebook page or subscribe to my YouTube channel. You can also visit my website in the description below.
Once again, thank you for watching this video. Stay safe out there. I will see you soon.
