A Demand Spike Before the Pause? | Think Realty | A Real Estate of Mind
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A Demand Spike Before the Pause?

A DEMAND SPIKE BEFORE THE PAUSE?

Rising interest rates, while not yet a drag on housing sales because cash purchases exceed 50% of total Single Family Residential unit sales, have awoken the laggards in the home buying market.

This is apparent from a slowing in the expansion homes available for sale inventories. Altos Research data by market shows days-on-market trends have reversed from a three-month expansion trend while asking prices are almost universally climbing.

INTEREST RATES RISING

With interest rates clearly on the rise there will be a flurry of buying in those markets that are less overbought, while the laggards with credit decide they better get into the market “while the gettin’ is good.”

They will buy at a peak and then endure a plateau as the market slows reflecting difficulty in overcoming mortgage and credit hurdles.

What will save values is the fact homebuilders are still careful about building volumes and because of this demand pressure will not be taken off existing housing stock.

THE COMPOUNDING 1%

The Centers for Disease Control have just reported that the U.S. birthrate has gotten back to normal with about 4,000,000 new births a year, and a shift in median age as mothers who have delayed their child bearing into their thirties because of a previous lack of confidence in their economic future.  Provided the economic spinmeisters can keep the improving economy story going, it is probably safe to assume the 1%+ annual birthrate will hold.

The math fact is that a compounding 1% (in just the birthrate,) not accounting for immigration or accelerated or catch-up household creation, takes the U.S. population to 600 million in fifty years. At the current rate of housing needs we must build 2,700,000 houses every year for the next fifty years just to stay abreast of demand.  Our current recession build rate is around 500,000 new homes built a year. This does not account for projected 2.4 million shortfall based on recession retarded household creation and resurging demand.

THE RIGHT BUSINESS

Residential real estate development, investing, rental ownership and management are the businesses to be in for the foreseeable future.  Welcome to the business of real estate as a sound alternative investment.


Category: News