Home prices still have room to rise. This is according to Barry Habib, chief executive office of MBS Highway and the multiple winner of Zillow’s “Crystal Ball Award” for the most accurate real estate forecaster.
Habib is very optimistic in his view of house prices saying that they are going to surge higher. He says that one big difference between now and 2007 is the supply of homes. There’s about 12 million more households than 2007 but three million fewer homes to buy.
“How can you have a bubble under those conditions?” he asked.
In a discussion with David Rosenburg, the chief economist and strategist at Rosenburg Research, affordability was another main topic of conversation around housing. Even though wages are not rising as fast as home prices, they are rising enough to meet the higher typical monthly payment.
“Round numbers, you’d have to pay, instead of $1,000 bucks a month, $1,200 a month for principal and interest, because it’s borrowing 20% more. That’s a $200 a month increase, which seems to make it less affordable unless your income was enough to offset it,” he said. On $5,000 a month income, that is a 4% rise. “Now this is an oversimplification certainly, but it just gives you an idea of why you can’t say the level of appreciation has to be met exactly by the level of increase in income, it does not,” he said.
Based off of today’s numbers, it takes 19% of monthly income to make a mortgage payment compared to 30% in 2006. That is a huge improvement on how people are being paid and also keeping within their budgets.
Habib believes that if you buy today, you will be “handsomely” rewarded over the next few years.
It’s not easy to buy a home today. High prices, bidding wars (although those are slowing down) and higher mortgage rates. But we agree with Barry Habib, buying a home today will greatly help you in the future for many reasons, mostly appreciation.
The MBA reports that July mortgage applications for new home purchases fell 16.1% from July 2021, down 7% monthly from June. This is a good sign for people who are wanting to buy. This shows that there is not as much competition.
Redfin reports that July home sales fell 19% year over year to lowest level since mid-2020 while new listings were also down, with some prospective sellers staying put as price growth slowed. Sellers may sit on the sidelines for a little but as soon as they realize rates are dropping, things will turn into a buyer’s market quickly.
Our advice: act now. Figure out what you can afford, what monthly payment you are comfortable with and how to get into a home. You do not have to have 20% down. There are many creative ways to own real estate and we are experts at that. Reach out to us today to discuss many different options.