Housing Market Myths
As the housing market became a main stream topic throughout the pandemic, more and more people got into real estate or follow the industry. While this is good for the overall real estate industry, all these new eyes and perspectives can lead to some negative factors. One of these negative factors that all this attention has led to is some very debatable myths about the housing market. Real estate is an industry that accounts for close to 15% of all the economic activity in the United States, yet takes no actual research for people to form opinions. Here are a few housing market myths, and how to avoid getting caught up in them.
Housing Market Myths: Buyer Myth #1
While the real estate market has been dysfunctional in a sense throughout the pandemic, it has been one of the key drivers in the economic recovery. Because real estate became so sought after due to low rates, prices accelerated to record inflation-adjusted prices. Because of the hype in the real estate market, housing price inflation has increased to the most on record, with home prices increasing 20% from February 2021 to 2022. To slow the acceleration in home prices, and prices of everything in general, the Federal Reserve is aggressively looking to raise interest rates to slow demand. This has led to mortgage rates increasing to the highest level since 2011. This is where our first buyer myth comes in play: buyers should wait to buy until home prices and mortgage rates fall.
Here is why this myth is wrong. Waiting for home prices to fall will most likely leave you between a rock and a hard place. With prices expected to hit close to a double digit increase in 2022, waiting to buy will cost you. In fact, the first time we are expected to see a decrease in home prices overall is 2024, according to experts. How much of a decrease you might ask? A whopping… 2.4% decrease. A 3% decrease, to make the number easier, is nothing compared to a 20% increase, following a 17% increase in prices. Not only are home prices expected to gradually increase, so are mortgage rates. This myth for buyers will likely cost you money in the thousands of dollars range.
Housing Market Myths: Seller Myth #1
As we have talked about before, housing prices continue to increase at accelerated rates. This has led to speculation and false guidance from the internet, family members, and even professionals. A common rule of thumb in investing is that an asset is only worth what the next person is willing to pay for it. This can create a false sense of wealth until it comes time to sell. Because of the strong seller’s market we have seen, it gives sellers the pricing power in the real estate market. This is where our first seller myth comes in to play: a seller can set the asking price for their house at whatever they want.
While this is technically true to an extent, it does not mean it is smart. Like we mentioned in the paragraph before, just because you have the pricing power does not mean there is a buyer for your home at that price. Few people realize that real estate professionals are experts and able to help predict the highest and best price based on your market and conditions. Listing your home at whatever price you want is possible, but not practical.
Buyer Myth #2
This is my least favorite myth to hear as a real estate professional. In fact, it is so detrimental to hear that it irks me and the team. The myth is that buyers waiving their home inspection is a good idea if they want their offer to stand out. In NO WAY, SHAPE, OR FORM is this a good idea, especially for a first-time home buyer. While waiving an inspection may make your offer stand out, it does not always mean in a good way. Sellers can see this as desperate and make the conclusion you will move into a home under any condition.
While a newer home may allow you to get away with this, there is always a risk of something coming up and being on you as the buyer. Spending a few hundred dollars up front for an inspection is basically like an insurance deductible. You pay a professional a few hundred dollars to make sure your investment is in good, sound working order with no hidden defects. A simple inspection can cost a few hundred dollars but save you a few thousand dollars.
Seller Myth #2
This is another classic myth, that honestly might have been true if you said it 5 years ago. However, in today’s real estate market, this myth is laughable. We have seen some truly dated homes, with weird décor and very poor feng shui sell in days on the market. The myth that allows this statement to be true is this: sellers have to renovate their home before selling it. Like I said, maybe a few years ago, but maybe not even then.
However, this is definitely not true in today’s market, as home of all shapes, sizes, ages, and design can sell to multiple offers in days. The most important part to selling in today’s market is to just make sure that your home is prepared to sell. There is a checklist that we provide to clients before selling their home in order to prepare it. If you can follow these steps, we can get your home listed and ready for viewers in just a few days, regardless of condition.