Epic Housing Shortage About to Lift?
Diana Olick and other news hubs are running with the epic inventory shortage story.. I get it. I probably would too. The only problem, it has our clients wondering if now is the right time to jump in or hop out. If a bubble is coming. If this “inventory swell” will give us a drop in prices.
DMAR’s market trends report comes out on Monday and it will show June’s active inventory count landed at 3,122, compared to last months 2,075. Yes.. quite the lift.. 50%, but it’s not yet even a drop in the bucket. Over past 30 years, the average active listings for June is over 16,000. Even 6000 would be fabulous. 3000 just gets us started. Be aware of what the papers are saying so you know what your clients are reading… then be able to tell them… YES!! we are all thankful for the increased new listings giving us a lift in active listings. But let me share what else is happening in the market that makes now (ie. not waiting) the perfect time to buy.
The Economics Behind the Demand
Mortgage purchase applications dropped to a 5 month low. Should we be worried.. right when inventory went up? Or did active listings go up because demand went down? New listings are up 24%.. so not really. That’s a phenomenal pick up and exactly what this market needed after months and months of multiple bids, over asking, and disheartened buyers. The drop in mortgage purchase applications is showing up in the 2% gain in pending, way down from the 17% increase in May. So buyers are exhausted.. and, or they don’t know that their door just opened. We have to be their champion… to call anyone who gave up and let them know that their opportunity to start building wealth, gaining equity, creating financial independence is today. Inventory is out there and rates have stayed low.. 2.93% to 3.02% … couldn’t ask for a better gift on a holiday weekend!
Here’s my thoughts on demand.. while it might be taking a holiday, it’s stronger than ever.
Birthrates will support not only the next four years as the largest age group (29 yr olds) age towards 33 (the average age of a homebuyer); but for decades to come. There’s not a drop in birth rates until those kiddos who are 12 turn 13.
We also have the strongest personal savings rate ever. Thank you CARES Act and stimulus packages.. there is now a bath of liquidity that was put into the stock market, bitcoin, and real estate. This money is making money and the US Savings rate is the beneficiary. Increased savings will continue to provide opportunity and stability to our housing demand.
ADP released jobs report this week showing 692,000 private job creations. The BLS Business Survey showed 850,000 non-farm jobs created. The job gains are robust this year with 3 million (that’s 3,000,000) hires already this year. That still leaves 7 million unemployed who were working before the pandemic. YET.. we have 9.3 million job openings. The jobs didn’t go away, the economy did not get depressed. We will continue to gain jobs, wages, and strength.
Our real estate market will continue to gain in value. Case-Shiller showed in their June report (April data) a 14.6% record price growth. Denver saw a 15.4% annual price growth and is now 89% over our peak in 2007. This will not end.. it will however slow down. So, with rates at 3% and continued appreciation.. why would anyone want to resign their apartment lease? 😉