The Real Estate Market is Defying Expectations in 2023 — Here’s Why
What’s the deal with the real estate market, folks?
I mean, I remember back in 2008, everything was falling apart like a Jenga tower made out of toothpicks. But now, we’re in the middle of recession, and the real estate market is somehow holding up fairly well? What gives?
Well, it turns out there are a few reasons for this. First off, there’s still limited supply. Back in ’08, there were too many damn houses on the market. But now, NATIONALLY there’s not enough new construction happening, thanks in part to the pandemic messing up supply chains. (This may vary locally) So, less supply equals less downward pressure on prices.
One reason was low-interest rates, now it’s people sitting on those fixed loans not wanting to sell and take a loss. The past ten years it was easier for people to get mortgages now than it was back in the day and most people locked that in. If we had mostly variable rate mortgages things would likely be very different. For a decade, many people were able to buy homes or refinance their current ones, which drove up demand and helped keep prices afloat. No one wants to be in the market now so unless we have mass layoffs or deleveraging, most people are holding tight trying to wait out the market and interest rates.
Think of a current battle of tug-of-war between buyers and sellers, and as of now there has not been a massive event to tip things into the buyers favor. At least the days of online bidding wars site unseen via I-buyers seem to have drawn to a close, but now we all have high interest rates and little bank, M2 money supply liquidity to deal with. The recent bank runs have helped about as much as a case of Clemydia.
And let’s not forget about strong demand. Despite all the craziness going on in the world, people are still looking to buy homes. Millennials especially. In droves they are hitting the home-buying, settle down, have kids phase and want more space and the benefits (maybe more perceived at this point) of home ownership. More are working from home (despite recent crackdowns in back-to-office) and need the extra space, or maybe it’s just that they’re sick of renting. Either way, this demand is helping to keep the real estate market from tanking like in 2008. (so far)
Up until now, the government has stepped in to help prop things up. Back in ’08, they had the Troubled Asset Relief Program and the Home Affordable Modification Program. This time around, they’ve got mortgage forbearance programs and eviction moratoriums. All of these things help prevent foreclosures and kept people in their homes. These have mostly now run out but saved a lot of people from losing homes in the pandemic and many stayed in their homes.
Now is the real estate market invincible?
Of course not, folks. On the other hand, I wouldn’t expect it to be a great asset to Appreciate for the next few years until buying becomes more appealing again.
I am personally investing more in single family rentals via public reits like Invitation Homes, American Homes 4 Rent, Tricon Residential and private rental real estate such as through apps like Fundrise. These funds pay nice dividends as they are not reliant on simply home appreciation, but receive cash flow via renters, many in my opinion with less turnover and better financial security than many renting apartments. I will attach some links to these companies at the bottom.
There are always going to be ups and downs. But for now, it looks like the real estate market is holding relatively steady. And that’s something to be grateful for…unless you’re trying to buy a house, in which case, good luck!
-Mike Satoshi
