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What in the World Is Going on in Real Estate

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Paul George,

We get in our daily routines, and no one cares about happenings outside of our own little universe, unless it’s real estate.  Real estate is one of those things that even when people are not buying or selling, they seem to pay attention to what is going on in the housing market.

We all have a sense that we have a low inventory of homes for sale. We have a sense that house prices are high and we have a sense that interest rates are higher than they were during the covid years.  We have a sense that a lot of homeowners have a lot of equity in their current homes and they feel pretty good about their situation.

Who cares about low inventory when we are comfortable in our current home.  We are happy that the values of our homes are going up, but we are not selling because then we might have to buy one of those higher priced homes. We won’t sell because we have no mortgage, or a 3% mortgage so why would we change that?  Four out of every ten homes carry no mortgage and one out of every four baby boomers say they will never sell.

As great as homeowners feel about their 3% mortgage, or no mortgage, there are 40 million millennials getting ready to come into the housing market and they need those houses.  Builders can’t keep up, those baby boomers who have the equity have nowhere to go, so what is going on?

It’s a classic case of supply and demand.

The average age of a seller is 63. On average, they bought their first home when they were 26. Builders have to deal with zoning regulations and NIMBY (not in my back yard).  Everyone knows that we need housing; they just don’t want it near them.  A large number of home sales are because of life changes, they have grown out of their current home, they have to go to assisted living, they get married, they get divorced, they pass away.  But the number one reason the majority of people move?  They want to be closer to family.

Great to say there’s nothing more important, but there are economic reasons as well.  Often times grandparents need to help with the kids as both adult kids need to work to afford their lifestyle.  Sometimes kids need to care for aging parents.  Builders are building multigenerational homes meaning mom and dad have a wing in the house to share those responsibilities.  They can also help with downpayments and expenses.

All of these factors have changed the dynamic of a home sale.  But at the end of the day, we have a ton of new buyers coming into the market, but we don’t have enough houses to put them into. Less supply, high demand equal high prices and renting for longer periods of time is the new normal

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