Friday, May 20, 2022

Is the market showing signs of slowdown?

Last week there were 171 new listings that came on the market in Clark County in a single day. This is great news for buyers as our market has had such a tight inventory for so long. If this trend continues we could see a bit of a softening int he tensions for buyers. I do not foresee prices tumbling at this point, but I do see prices flattening out and maybe even dropping just a tad. 

Sellers will not longer be able to expect multiple offers tens of thousands above asking if the inventory settles into a more healthy 3-6 months. A few months back inventory levels were measured in days! With our local median price hovering near $600,000 we could stand to see a a very modest slowing to help keep pace with incomes and the challenges with the high inflation currently infused into the economy.

It will also ease a little pressure in the "bubble" that can carry us through an minor recession that is likely to hit sometime in the next 18 months. Buyers using low downpayment products like VA and FHA should not be afraid to buy in this market, but always remember that low interest loans should be viewed as a longer term prospect. If the market softens you may have to stay in the house for 3-5 years to gain enough equity to get out. Of course if the recession does not come you may be able sell the very next year and come out ahead. It however is not wise to assume the recession will not come, but rather assume that it will.

Buying a house should be a long term investment and remember it is one of the few investments that provide a mandatory commodity of shelter, shelter that you otherwise have to pay rent and make someone else rich. 

Tuesday, April 26, 2022

Inflation is a wicked enemy for Retirees

The inflation problem is certainly not temporary as politicians and 'yes-men' economists suggested last year. For those retiring on fixed income benefits from savings or IRAs, this eats quickly into principal capital and can shorten the length at which funds will last. For pension earners the inflation is rising faster than COLA increases and that can feel even worse on the wallet.

Real estate remains a solid investment with double digit gains that will continue so long as the inflation does. But alas, the FED is trying to reign it in with rate increases. As this monetary squeeze developed over the next several months housing may finally slow down as buyers will struggle to qualify for loans.

Retirees selling a larger family home and downsizing still hold an advantage as often they are paying all cash or have an enormous downpayment which always makes sellers smile. 

Those nearing retirement should absolutely reach out to your CPA or Financial Planner to see if working and extra year or two can offset this horrendous inflation. It is wise to consider these things as once you retire it can be very difficult to un-retire.

Washington State has no income tax and that allows you to keep more of your money so bear that in mind before moving to some tax heavy state just because they have a little more sunshine ;)


Friday, April 22, 2022

Tight Inventory Remains, No Spring Surge Yet.

The usual April surge in listings has not happened and home builders are unable to build houses quickly due to supply chain and labor shortages. This is the tightest real estate market ever recorded in Clark County. This same scenario seems to be playing out all over the country, with little exception. 

In a normal healthy real estate market there would be about 4-6 months supply of houses. This simply means for example a 4 month inventory level: that if no new listings entered the market and the rate of closed sales remains the same, it would take 4 months to sell every listed home. Our current inventory levels are measured in DAYS right now!

Higher interest rates have eliminated many buyers from the market and that would typically slow the market down. But lack of inventory keeps the pressure on the market. If inventory doesn't start improving we may be in for yet another 15-20% price gain in housing.  

The best thing for the real estate market right now is a steady increase in inventory levels. This coupled with a lack of buyers due to higher loan costs would help us to a nice soft landing rather than something more abrupt. The bumpy landings are much harder economically and can lead to other sectors feeling the impacts.

People thinking about selling but worried about where they might go is probably the biggest inhibitor to fresh listings. People moving out of the area are fine as they have a 90% chance of moving to a less expensive market. Yes we are definitely in the top 10% of expensive markets.

As is true in any hyper inflated market, sellers can wait too long to sell. I do not see a huge correction like we had in 2008 but I do see a significant correction if inventory continues to be tight and prices continue to rise. Rate are now back in the 5s which is still a low rate, but after several years of 3's and 4s many buyers that were able to buy, simply cannot at the higher rate. As these buyer leave the market the pressure will start to wane and if inventory starts to rise too late the market could see a fast slide down perhaps in 2023.

Right now thousands of households in Clark County are sitting on a massive amount of home equity, but that can be eroded if prices start to fall. Owning a home for several years makes it easier to buy the next house because you have your downpayment and perhaps more in the current home equity. First time buyers have to scrounge for that downpayment. 

Hopefully sellers will slowly emerge this summer to take the edge of the market and help us ease into this inflationary cycle we are in right now.