Thanks to high mortgage rates, mortgage refinance rates, and even higher home prices, the vibe among homebuyers has been fairly bleak these past couple months. In Fannie Mae‘s most recent National Housing Survey, only 17% of consumers said they think it’s a good time to buy a home.
To that I say, timing is everything in real estate. And right now, prospective homebuyers find themselves in a unique window of opportunity. As the spring selling season kicks off, many educated sellers know that buyers are experiencing spring fever and are tired of sitting on the fence watching home prices increase. In Denver in particular, new listings increased 29.12% month-over-month and 22.63% year-over-year. Active listings at month’s end rose 13.14% to 5,511 homes, an astounding 45.87% gain year-over-year.
Serious buyers showed discernment as they know inventory is growing. As a result, sellers who are winning in this market spent time making sure their homes are in show-ready condition. In short, if sellers executed their plan correctly, they received multiple offers and maximized their profit.
Buyers right now have a different strategy than before as some were swept into multiple offers on their dream home while others understood they may find gold at the end of the rainbow if they broadened their search parameters. These buyers understand that more inventory is coming to the market and that they will have options. They are also aware that they can negotiate on price and terms up front, as well as negotiate at inspection. Difficult inspections have been on the rise over the last few months. If buyers feel they are paying top dollar due to increasing mortgage rates, they want their new home to be in move-in-ready condition.
All in all, the spring season is heating up and here are five reasons to advise your clients to ride the current real estate wave:
Supply and demand dynamics
The ongoing imbalance between supply and demand continues to shape a robust real estate market. With only 1.3 million available homes on the market as of late December, representing a low supply, buyers are still facing limited options, driving up prices. This scarcity in inventory acts as a safeguard against an imminent market crash, providing stability and support for continued price growth.
Note: The main reason people aren’t selling homes right now is to hang onto the competitive mortgage rates they locked in a couple of years ago, keeping inventory low until those rates come down.
Homebuilder constraints
Unlike the prelude to the 2008 housing market crash, homebuilders today face unique challenges that mitigate the risk of overbuilding. After the last crash, builders scaled back significantly and never fully recovered to pre-2007 levels. The time-consuming process of acquiring land and navigating regulatory approvals poses a barrier to rapid expansion. As more homes become available, a gradual restoration of supply and demand equilibrium is anticipated, preventing a sudden market collapse.
Demographic trends driving demand
The demand for homes is bolstered by demographic shifts, with various groups contributing to the surge. The pandemic prompted many existing homeowners to seek larger living spaces, especially with the rise of remote work. Millennials, a sizable chunk of people in their prime buying years, are entering the housing market in force. Additionally, the growing Hispanic demographic is also showing a keen interest in homeownership. These demographic trends create a sustained and diverse demand, supporting a stable housing market.
Stringent lending standards
In the aftermath of the 2008 housing crisis, lax lending standards were identified as a major contributor. Today, however, lending standards remain stringent, with borrowers required to meet rigorous criteria, including excellent credit scores. This adherence acts as a protective measure against the artificial inflation of prices and the potential for another housing market crash.
Foreclosure activity
Unlike the aftermath of the 2008 crash, the current real estate landscape sees muted foreclosure activity. The cushion of equity that most homeowners enjoy serves as a buffer against waves of foreclosures, preventing a repeat of the market depression experienced in the last housing crisis. While there has been a slight uptick in foreclosures, it pales in comparison to the deluge experienced in the aftermath of the last housing crisis.
In 2024, the housing market is set to continue on. The combination of low inventory, constrained homebuilding, demographic trends, stringent lending standards, and muted foreclosure activity creates a solid ground for prospective homebuyers. The window of opportunity is open, and it’s time to guide your clients to ride the wave because waiting on the sidelines as a buyer is going to cost them.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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