What's up, everyone. It's that time of the month. Time to talk about the current real estate market and this time, I'm not going to focus on the numbers. I'm going to give it to you straight. So let's get started.
A lot of people thought the housing market would crash last year and today a lot of people think this housing market is going to last forever. One thing that is for sure is that nothing lasts forever, and we have some real problems in the underbelly of the economy. I know I want this boom in the housing market to last forever, but nothing does.
If you are trying to time the market to buy or sell a home, or you worry about entering the market too late. It's important to understand how the market works so you don't miss your window of opportunity.
Before we got here, the 2008 crisis created strict regulations that left an incredibly large number of homebuyers in the U.S. out of options. Remembering the Great Recession today is important because it was a housing-driven crisis. Most Americans haven't forgotten the fear and destruction of value that impacted our economy and their livelihoods. These effects drive the approach and response to future cycles. The crisis also had unintended consequences like tighter lending standards, which made borrowing more difficult, leading to a record amount of equity in homes. If the market goes up and people can't access their home equity, it will increase equity value. It could also cause consumers to use credit cards more often at higher rates.
The housing market cannot have both euphoria and a troubling economy — either the world gets better for the middle and lower class, or the housing market slows. After 14 years of consecutive growth, it will have to slow down eventually. Talk of rates going higher or inventory increasing will hurt the market, and eventually, housing demand may slow after the pandemic effect does so, especially once we begin to see a move back to urban areas.
Past cycles following crises in 2008 and 1987 suggest this. The Fed has indicated that rates will increase once they see a more stable economy. The better the economy is, the more likely rates will go up, building will increase, and sales will slow. Whether the economy gets better or worse, I believe the housing market will slow, sentiment will shift, and prices will drop.
I expect interest rates to stay low, but demand to slow too. Once the market turns, it will turn fast. You will experience a fear of missing the top of the housing market. I expect the equity value in homes to decrease and unemployment to decrease since a significant amount of unemployment is from the service industry. With vaccines coming, it's definite that will help the job market.
You all need to know that the housing market will not be on fire like it is today forever. Rates will not stay this low, and neither will inventory. Additionally, the government will move from legislative priorities like foreclosure rescue to other things like infrastructure before long.
I worry about this false sense of "it's going to be great forever" and the wait-and-see mentality it encourages. That's how bubbles end — just look at the 2008 crisis or early 2000s tech bust. Americans who are waiting to sell should not wait. I always say it's better to act when you can, not when you must. By the time you start to see prices drop and you try to make your move as a seller, it will be too late. And as a buyer, by the time prices go down, rates will be up and it will cost you more to pay for the monthly mortgage than it does today. Then, what was the point of getting a cheaper a sales price?
With that said, I think it's a good time to just tell you where we're at in Knoxville by sharing a few numbers.
The average sales price in Knoxville is $337,000 which is up over 22% from last year.
Houses are selling an average of 32% faster than they did last year and slightly faster than last month.
We have only 1,339 active listings, not counting homes under contract. We also sold 708 homes sell in March. This leaves us with less than a month of inventory. inventory is down 59% from this time last year.
As you can see, it's a very volatile market. Still, when things start to change, it will happen so fast that your window of opportunity will be gone before you can find an agent to help you get started.
Do not wait any longer for the "right time" to make your move. The right time is now.
That's it for this month's real estate market update. I really hope you found it helpful. As always, if you need anything that I can help with, do not hesitate to call.