I just came back from an annual conference that, for me, are the four most interesting days of year. Keller Williams brought together 15,000 agents to share knowledge, inspire and be inspired, and to learn about future projections in the real estate market.
Here’s what I learned and why I believe the time to downsize is NOW. If you’ve been thinking about downsizing and wondering when is the right time, my recommendation would be not to wait.
The Numbers That Drive U.S. Real Estate
There are 5 things that drive real estate in the United States:
- Home sales
- Home price
- Month’s supply of inventory
- Mortgage rates
- Affordability
Look at the two charts below. 2015 was the best year for home sales since 2006. 5.26 million homes were sold.
Also, the median home price nationally for 2015 was $222,400. Take a close look at that chart. We’re back to 2006 numbers.
Do you recall what happened in 2007? We fell into a hole and home prices took a freefall. I’m not being a doomsayer, but I do believe economic cycles. Historically, there’s a 7-year cycle when it come to real estate prices.
Can We Maintain the Growth?
I certainly hope so, but there are signs that say otherwise. Mortgage rates are still low and averaged 3.85% in 2015. When rates are low, buyers snatch up homes faster. As a result, the month’s supply of inventory is at the lowest it’s been in 10 years. Demand for housing and low mortgage rates have turned 2015 into the best year for home sales since the bubble years.
So why am I urging you to sell now and take advantage of a “Sellers Market”? Why not just wait and see if prices keep moving up? I’m simply staying alert and keeping my eyes on the economy.
— Oil prices are declining and although that benefits consumers, it’s an indicator that this could act as a slowdown for the economy in general.
— Between 2003 and 2015 the total amount of student loan debt nearly quintupled. 75% of recent graduates had student loans, with balances averaging $29,400. In other words, younger people who in past decades might have bought homes for their growing families can no longer afford a down payment.
But don’t despair! Job growth is still strong and loan delinquency rates continue to decline.
The Answer to “When Should I Downsize?”
Here’s my simple analysis:
- There will be a decline in 1st-time buyers as graduates cope with their loans. In addition, persuasive indicators tell us that Millennials are less inclined to own anything and would rather rent homes and use Uber instead of purchasing property, even it makes less financial sense.
- Banks are continuing to loosen their lending requirements. I don’t think we’re looking at the catastrophe laid out in the movie The Big Short. But it does mean it’s easier to qualify for a loan. Which will lead to more bad loans.
- New home construction is still in decline.
So now is the right time to downsize, and certainly to start seriously planning for it.
Housing needs are high. There are fewer newly built homes on the market, so your older home will be in demand. Loans are still easy to get and rates are still low.
Those of you who had bought at a high in the market and were “under water” are possibly flat by now and can afford to sell. You’ll make money instead of losing it. Or at least break even.
Prices are still rising, but we don’t know for how long. There are no rock solid predictors, but as I said before, real estate sales have their 7-year cycles, and that shift might be on the horizon.
In conclusion, sell while prices are high and you can find your new home before they get any higher.
If you have any questions about this subject or can share some wisdom, please contact me.
Too many comeilmpnts too little space, thanks!