The future of the current real estate market uncertain

With such a low inventory and an abundance of buyers, many wonder how long the current real estate market can hold up, but no one really knows.

Madison County area real estate agents attribute several factors to the current market, the first being low interest rates. Mississippi Realtors Central District Vice President Amanda Polles said interest rates were extremely low and people were taking advantage of an interest rate of around 2.5% to withdraw equity from their homes. current house and moving it to a new house – giving them almost the same payment amount as their old house.

William Fincher, a Madison County real estate agent, said money is cheap right now and people are spending their money to buy homes, even though prices are much higher than two years ago. .

“Obviously, low interest rates have been a driving factor in the housing market,” Fincher said.

However, there is more to the market than low interest rates. Polles said the pandemic was a driving factor in the current climate.

“I feel like a lot of people during COVID-19 and lockdown just needed a different change of scenery – whether it felt like a new neighborhood with kids to play with or remodeled,” Polles said. “When people stay within the four walls of their home, they’re tired of staring at a kitchen counter they’ve begged their husband or wife to change.”

For this reason, many people have decided that it is time for them to move. However, on the other end, Polles said many other people have decided to stay put due to the pandemic. This has caused a problem where there are a lot of people looking to buy and not enough houses to buy.

“We have a shortage of inventory and a crisis, and I think there are several factors that explain why we are in the difficult situation that we find ourselves in,” Polles said. “I think a lot of the inventory was closed because a lot of people chose not to move during this time. They stayed put, so when something came on the market, there were so many buyers and not enough houses available because people had nowhere to go.

Although there are usually more options due to new construction, many people have walked away from this due to high construction prices due to COVID-19.

“New construction has slowed due to skyrocketing inventory and materials and simply running out of supply,” Polles said. “I just feel like the new builds have suffered losses and obviously the prices have skyrocketed because of those conditions so a lot of people couldn’t afford it. It made the very attractive existing inventory.

Fincher said the pandemic has increased the cost of building factories for wood, metal, copper and more because companies can’t hire labor, affecting the entire supply chain. ‘supply.

“Builders pass on inflated construction prices to the consumer,” Fincher said. “They’re not going to lower their prices, so they’re just going to make the lot prices more expensive.”

Fincher said it’s the old game of supply and demand that’s happening right now with sellers and buyers. Sellers recognize the value of their home in limited inventory, driving up the price, and buyers continue to buy the homes.

“People are paying so much more for homes than they were a year and a half to two years ago,” Fincher said. “They’re paying $40,000 to $50,000 more than they historically had and that worries me.”

In Madison County, from December 5, 2020 through January 5, 2021, there were 441 homes available for sale. This year, during the same period, there were 97. There were 101 houses sold this year during this month, which is 49 less than the previous year. However, the average price of the house sold rose from $347,522 to $388,082.

The same is true in Hinds County, where there were 609 homes for sale from Dec. 5, 2020 through Jan. 5, 2021, and only 84 homes for sale in that same month this year. But, again, the price of the average home purchased this month has skyrocketed from where it was a year ago. Last year, the average price was $162,000. Last month it was $211,262.

Fincher said he was concerned because if a young family bought a house, they would pay $40,000 more than the typical cost of the home’s actual value.

“If they don’t plan to stay there for about ten years, they won’t get their money back and will be upside down,” Fincher said. “Something has to happen. There is going to be a period of correction in the market because there always is.

Fincher said as much as he doesn’t want this to happen, he anticipates another housing market slump. He said he had managed foreclosed properties for eight to 10 different banks in the region in the past six to seven years since the last recession, and that this accounted for 60% of his business.

“It’s all real estate stuff, and I think it’s going to happen again at some point,” Fincher said. “It could be 12 months or 36 months – it just depends on how the feds regulate all inflation.”

He said that while it’s concerning, it’s also good business for some estate agents while others are struggling with the shortage of inventory.

“It’s an unprecedented time in this industry right now,” Fincher said. “You talk to some real estate agents in the residential sector who are having the best year they’ve had, and then you talk to others who can’t find anything to buy for their clients. We are seeing bidding wars like I have never seen before on properties and homes.

Neither Fincher nor Polles said they have any idea when market trends will change.

“Hopefully the trend will be the same for as long as possible,” Fincher said. “If they start raising interest rates like they’re projected to do in 2022, then we’ll see kind of a slowdown in the current market trend. People who have money are still going to buy houses but I fear another 2010. I don’t think it will be another housing meltdown but I think you are going to get people upside down if they decide to sell after spending 30% more than this what the house is really worth. But people are paying ridiculous prices these days. It’s crazy.

Polles said that when it comes to the future, she doesn’t see anything changing in the near future.

“I wish I had a crystal ball, but I don’t see that changing anytime soon,” Polles said. “I hope that’s the case, because I have a lot of buyers who would definitely like to move. I just don’t see that changing anytime soon.

She said it was definitely “non-navigable waters” right now and not a sell-it-yourself market, but a time when experience and knowledge are needed.

“I’m grateful for the bargains, and we’re just going to keep going until the bubble bursts but, for me, something has to happen one day,” Fincher said.

About Adam Gray

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