wbt5845 said:
So you housing professionals - I keep seeing people say "this isn't sustainable". But my simple minded economics mind tells me the intersection of the supply and demand curves dictate cost.
Will the rise in interest rates cause the demand curve to shift? I hadn't looked in a while, but glanced this weekend and saw that mortgage rates have shot way up. I refinanced last year into a 15 year note at 2.25%. The going rate of a 15 year now is around 4.5%, 30 year is over 5.0%. That has to really be hammering people's expected mortgage note.
Will it shift the demand curve? Absolutely. But how much - who knows.
I'll say this - we are in a nationwide unprecedented inventory shortage. There just are not enough homes coming up for sale to help alleviate some of the pricing pressure. The national supply of homes just hit lowest levels and demand is still remarkably elevated.
Why is there a lack of homes? You can point out migration trends and work from home policies for sure. But the biggest reason I think the lack of home supply continues is rising rates, which is going to make the supply problem worse. If people don't want to sell now cause they have a 2.25% interest rate when today's rate would be 4.5%, what will they do when interest rates are even higher? You're not selling unless you have to.
If people aren't selling and builder's can't make the homes fast enough - supply isn't going to get better and demand is always going to be there. Millennials are finally ready to buy homes as they have kids and need space. The Zoomer's are right behind in terms of also having kids. Then you have investors also snapping them up (how many of you Texags'ers have a rental home or two?) to rent.
I don't think we see any relief on the horizon. We may not be seeing 20-25% price growth year over year - but you're still likely to see high single digits, maybe even a bit higher. I also want to point out the fact that there is tons of people on the sidelines with some cash wanting to buy but waiting until the market dips. So any slowdown is going to be met with an uptick and the party never ends. We will see if the economy slides into a recession can have a bigger effect.
