What keeps us up at night when worrying about the real estate market? It's not mortgage rates, low inventory, competition for top end homes or even a slow business cycle. Instead it has to do with the psychology behind buyer behavior.
Recently, a National Housing Survey conducted by Fannie Mae showed only 17% of respondents believed now was a good time to buy a home. That's the lowest level in over a decade! Real estate as a whole is very cyclical (heavy buying times in the spring and fall) and decisions are often influenced by the opinions of others, unlike many other consumer activities.
Consumer confidence is so low in part because everyone has seen accelerated home values in the real estate market for a few years now and "there's no way it can keep going up" or "it's going to crash soon". Combine that with a 24/7 news cycle that often focuses on home prices, affordability, and speculates on an impending crash.
So why does this worry us? In short, many consumers who planned to buy this summer and fall have held off, waiting for prices or mortgage rates to flatten or fall dramatically. The problem being this gigantic pool of buyers is growing and may combine with the typical seasonal demand in the spring, making for heavier competition than we have ever seen (even more so than this last spring). Rates are now starting to stabilize and while there is still low inventory, home prices have flattened as well. If this continues into the winter we may see the most competitive market of our lifetimes next spring which would once again sky rocket the price of homes.
Our advice to buyers is look now when everyone else is running from the market. Everyone complained about the competition this spring and now is the chance to get in before it happens again.
Great article Tom. Its a unique opportunity over the next few months. Two things we can be certain of over the next 5 years, rents will continue to rise and the buyer pool (Demand) will out way the seller pool (Supply) in Boston for the foreseeable future.