{"id":4380,"date":"2021-10-14T21:33:40","date_gmt":"2021-10-14T21:33:40","guid":{"rendered":"https:\/\/realestateagentmagazine.com\/?p=4380"},"modified":"2021-10-27T19:39:05","modified_gmt":"2021-10-27T19:39:05","slug":"cooling-or-collapsing-key-factors-to-consider-about-the-housing-market","status":"publish","type":"post","link":"https:\/\/realestateagentmagazine.com\/cooling-or-collapsing-key-factors-to-consider-about-the-housing-market","title":{"rendered":"Cooling or Collapsing? Key Factors To Consider About the Housing Market"},"content":{"rendered":"
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There’s a recurring question among the pundits and talking heads in the media recently:\u00a0with mortgage forbearance winding down, housing inventory hitting a 40-year low, and lingering uncertainty over a seemingly never-ending pandemic, is the housing market set\u00a0to significantly cool down?<\/p>\n

Only time will tell. But in my opinion, it\u2019s just getting warmed up.<\/p>\n

While some point to China\u2019s Evergrande debacle and our own crisis of 2008 and try to draw comparisons to our current market situation, the facts don\u2019t support any such analogies. In both cases, the problem was massive oversupply. In China, fully 22% of residential property is unoccupied \u2014 yet despite this, Evergrande ran up billions of dollars in debt building apartment complexes that now sit empty. As for 2007 and 2008, it was speculation that drove real estate price up, despite a glaring oversupply of houses. (How bad was the problem? It actually prompted then-Fed Reserve Chair\u00a0Alan Greenspan to say that\u00a0\u00a0the “low cost option\u201d\u00a0would be for the federal government to “buy the homes and burn them.\u201d)<\/p>\n

Neither case describes where we are now.\u00a0In fact, the issue currently facing American homebuyers is a critical shortage of available properties.<\/p>\n

A recent report from the National Association of Realtors estimates that the country is facing a supply deficit of 6.8 million housing units, primarily single family homes. This, despite a consistent demand for roughly 1.6 million such homes each year.<\/p>\n

There are several reasons for the shortage \u2014 one being that\u00a0construction of affordable new housing slowed significantly over the last 20 years. Another reason is that the college graduates who were forced to their parent\u2019s basements after the bubble of\u00a0\u201907 to\u00a0\u201909 saved their money and bought homes in droves once household formation resumed at a normal rate.<\/p>\n

Further complicating the issue is the fact that the pandemic has changed how people feel about housing. Between working from home and seeking a sense of security in a world that seems more unpredictable every day, people have re-prioritized home ownership.<\/p>\n

In 1981, trend forecaster and marketing consultant Faith Popcorn coined the term\u00a0\u201ccocooning\u201d \u2014 which, in a case of\u00a0\u201cwhat\u2019s old is new again,\u201d perfectly sums up where we are now. Our homes have become a place for work, play, and refuge. Homeowners seek insulation from the outside world and control over their environment. As a result, they\u2019re spending money on making them just right; sales at both\u00a0home improvement and home furnishing retailers\u00a0have surged in recent months.<\/p>\n

But once again, the issue is supply.<\/p>\n

Shortages are everywhere \u2014 a situation which could lead to problems. Shortages lead to inflation as too many dollars chase too few goods. Inflation then causes central banks around the world to tighten credit.\u00a0This shortage of housing finance has forced many credit-worthy borrowers who would otherwise be buying homes into rental situations.\u00a0We\u2019ve already seen the availability of credit being constricted due to the delays in recapitalizing Fannie Mae and Freddie Mac.<\/p>\n

Big real estate investors, asset management firms, and increased interest rates are other factors that drive up home prices and\u00a0make home ownership less accessible to average Americans during a shortage.\u00a0\u201cStagflation\u201d is a term first used in the\u00a0\u201870s to describe an economy that was experiencing consistently high inflation with consistently low economic output. At the time, the oil crisis was to blame. But since then, it\u2019s become more common to see rising prices during periods of slow or negative growth.<\/p>\n

That doesn\u2019t have to be the case this time. But it\u2019s going to take some action on the part of the Biden administration.\u00a0By finishing the recapitalization of Fannie and Freddie and the release of their conservatorship, the government could generate over $100 billion that could assist communities and first-time homebuyers.<\/p>\n

Either way, as the Federal Reserve System tapers later this year economic activity needs to accelerate \u2013 particularly the housing market. A strong housing market has a multiplier effect on many things throughout the economy. Everything from paint to appliance sales benefit.<\/p>\n

Again, only time will tell.<\/p>\n

 <\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

There’s a recurring question among the pundits and talking heads in the media recently:\u00a0with mortgage forbearance winding down, housing inventory hitting a 40-year low, and lingering uncertainty over a seemingly never-ending pandemic, is the housing market set\u00a0to significantly cool down? Only time will tell. But in my opinion, it\u2019s just getting warmed up. While some […]<\/p>\n","protected":false},"author":98,"featured_media":2298,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22,15],"tags":[],"class_list":["post-4380","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-real-estate-trend","category-spotlight"],"amp_enabled":true,"_links":{"self":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/4380","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/users\/98"}],"replies":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/comments?post=4380"}],"version-history":[{"count":1,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/4380\/revisions"}],"predecessor-version":[{"id":4381,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/posts\/4380\/revisions\/4381"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/media\/2298"}],"wp:attachment":[{"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/media?parent=4380"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/categories?post=4380"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/realestateagentmagazine.com\/wp-json\/wp\/v2\/tags?post=4380"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}