Instead of predictions from the Crystal Ball, I may need to use a blender this Quarter. Nationally & more importantly locally, financing & real estate news are all over the place. More so than I have ever seen it, & I am older than dirt.
Prices in Northern Nevada are still going up, but not as fast as they did in 2020. In 2021 the market moved up 19%. This is driven by the shortage of inventory. Many analysts are predicting that the qualifying ability in our area is maxing out.
Rentals are in short supply, especially in the detached/condo categories. This will self correct shortly, as we have 4800 rental units under construction with over 6000 in the planning stages. Larger than “typical” rentals are renting for over $2500 per month. That $2500 will pay a mortgage of over $500,000. So why rent? A few reasons: People think they have to have a 20% down payment. People are afraid of the process & don’t want to get crushed by a turn down. Some people don’t think their credit is good enough.
All three of these issues are fixable with the assistance of a knowledgeable Realtor & great lender.
Today rates are still hovering around 3.5%. Totally amazing! More importantly there is a bunch of money available for down payment grants or loans. With as little as 3% down, a person with average credit, & a stable job history can get a loan. Meet with a Realtor who has some financing know how. Forget the online wonders. You don’t end up with the super duper rate, & will struggle to get a loan closed unless you have sterling credit. Also the online guy does not have access to the awesome grant—down payment assistance. Shop local!
Take the time to sit down with your agent to understand the process. It is not like buying a car. & don’t believe the stuff floating around on the internet. The loan person who wrote that load of garbage probably doesn’t make a living selling & closing homes. The person is still living in his Nana’s basement & driving an Uber. The rate is not everything. The cash out of pocket & the closing cost are.
How about a crash & coming foreclosures? Black Knight— reported that there are approx. 1,000,000 homes in forbearance. This was the program designed to protect homeowners from Covid driven financial disaster, and it worked. Loans in forbearance are entering into repayment plans or restructures. The properties are not under water so people can refi or sell. The equities are large. So, no foreclosure crisis & the homes that do go on the market will help with the inventory shortage.
What are my conclusions?
- Rates will stay down until the Federal Reserve pushes them up to resolve the inflation challenge. Inflation is too high & will eventually create another kind of crisis in lending & eating.15 major players predict rates increasing to 4% by the end of 2022.
- Prices will continue to go up because of inventory shortage. The same experts are expecting inventory to increase steady & reduce pressure of prices.
- As the prices go up & the availability of affordable housing goes down, demand will decline because people cannot afford the cost of living, & finally the foreclosure bullet has missed us this time because of some fast thinking in the prior government. If you are in forbearance, this may be a crucial year. Rates still low, below 4% & prices increasing but not dramatically.
So around we go, just like in a blender. In the meantime, stay healthy & positive. My mother used to say it will all work out in the wash. I think she was correct. Happy New Year! As a seller or a buyer this is an important year. – Pat