The N.A.R. Chief Economist Lawrence Yun was befuddled in his previous press release, and now this:
“Home prices keep chugging along at a pace that is not sustainable in the long run,” Yun said. “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”
Yunnie is an old-fashioned guy who relies on historical norms. But more people are probably thinking the same – this run-up in pricing isn’t sustainable.
Or is it?
We are in an environment where we are peppered with lottery ads daily. People dream about getting rich quick, and selling your house is about the closest most people get – and it’s not enough just to sell your house for an all-time record price. Instead, every seller wants more than the last guy got.
Unless that mentality changes, prices will keep going up.
Won’t there be a point where we run out of ready, willing, and able buyers? Yes, but unless a seller NEEDS to move, they aren’t going to budge. They aren’t going to lower their price until they are absolutely convinced that they must – and it’s more likely that sellers will withdraw their listing and try again later.
If sellers do need a solution, there are more alternatives than ever:
- Reverse mortgages.
- Share with family.
- Share with others. (H/T daytrip)
- Loan mods.
Once we reach the point where the market stalls, it will stagnate for years until sellers and realtors realize they must adjust their price to sell. Realtors themselves struggle to accept the rules of supply and demand – they just keep hanging onto their listing until the market catches up.
Rising rates, economic downturns, political drama, world calamities – none will be as influential as a seller’s ego when it comes to adjusting on price.
Watch the number of sales – they are the precursor. If/when sales start to decline, all it means is that fewer sellers are willing to adjust enough on price.
Will their reason for moving be powerful enough to not seek an alternative, and sell for what the market will bear? It’s doubtful, and as a result, a market that is this hot will take time to re-calibrate – if it does at all.