Will The Strong Seller's Market Continue?
I have been getting many questions lately about the state of the housing market and whether I think it is sustainable. I wish I had a crystal ball to answer these questions, but that is not a reality.
What drives the housing market?
What we do know is this: three things drive the housing market. I call them the three I's.
Looking at our current North Texas housing market, we see these I's come together to give us the results we've had so far in 2020. Inventory is meager. Interest rates are at historic lows. Income stability has been surprisingly strong for most of the area's homebuyers. This means that we have seen a brisk market, low days-on-market statistics, bidding wars, and rising home prices.
What will the 2021 market be like?
The next question I often get is, "How long will this last?" Therein lies the problem. The future of the housing market holds a lot of uncertainty.
Let's address the Three I's and see if we can make some educated predictions.
Inventory: We all know that when supply is low, demand goes up, and prices follow. Knowing that 4-5 million Americans are missing mortgage payments gives me pause. What will happen when the CARES Act ends? Will the foreclosure market spike next year? Many experts believe that it will. Experts also believe that pre-foreclosure sales will also explode as many sellers dump properties quickly to get ahead of financial woes. We could very well see an increase in inventory. This could cause prices to stagnate or even drop.
Interest Rates: Most experts agree that these low interest rates are going to hold well into 2021. So that part of the three-legged I's should remain the same.
Income Stability: There is a lot of uncertainty about where we are headed economically with the pandemic; it is predicted to stick around for a while. Overall job numbers indicate that in 2020 only 70% of those affected by layoffs and furloughs will go back to work. We also know that 30% of Americans missed housing payments in June - that is, rent and mortgage payments combined. Nationally, 4-5 million Americans are utilizing the mortgage forbearance program. The good news for the North Texas area is that the Dallas area fared much better than most other major metropolitan areas. Job growth occurred in the DFW area in May, June, and July. Let's hope this recovery stays on track.
Where are we headed?
That is the question we all wish we knew. Historically, the DFW metroplex tends to be less dramatic than other markets. Our highs and our lows do not fluctuate to the extreme like other areas. We have a strong economy and are showing signs of a healthy recovery. However, the unknown factors of the election, the extent of the pandemic, and the potential flood of inventory to the housing market give our industry some uncertainty.