We Are At The Top Of The Market

The last few months have been a roller coaster for everyone.  One day people have work, the next day there is none. One day we can venture to stores and the next they are closed.  The housing market has taken an interesting ride with Covid as well.  I had an open house on March 15th which was just days after my children were sent home from school being told it would just be two weeks at home.  Everyone was asked to stay home and the housing market took a short break.  A really short break.  Within weeks after this we were seeing multiple offers on a lot of homes.  By June the market was on FIRE.  This was a result of fewer people putting their houses up for sale (about 40% less that where is was in the summer 2019) added with interest rates that were unbelievably low and people having more time and thoughts geared toward getting into a new home.  We are still seeing a very strong seller's market.

LA Times called me yesterday to ask about the market and how things are looking.  I spoke to the writer and told him what I was seeing regarding multiple offers and a very small amount of houses to choose from.  I was on the verge of telling him something else but I held back.  This morning I reached back out to him and told him this....We are at the top of the market in my opinion.  This is where the house prices have reached a peak and I believe in the beginning of 2021 we are going to be in a buyer's market where there are more houses for sale and less buyers wanting to buy.  Here are the factors I believe that will create this by next year:

• The effects from job loss will take toll and we will start seeing that before too long in buyer's and seller's decisions. 
• More buyers will want to sell either from loss of income this year and wanting to downsize. Wanting to get the equity from their homes.  Major life changes such as moving in with family or moving to other cities and states. 
• Interest rates have only one way to go from here and that is up which will slow buyer's momentum for a while. 

So here is why I hesitated telling the news I thought this was the "Top".  I really watch my words carefully when speaking to my clients about the market and my opinion on the future. I never want to use anything that I believe will create a sense of fear or motivate them to do anything other than what they believe to be the best decision for themselves and using phrases such as "The top of the market" is a pretty strong prediction. 

But let me be clear about something when I say this.  While I believe this is the top, I do not believe we will see a CRASH.   I do believe house prices will come down a bit. I think we will have more sellers than buyers next year.  And I believe interest rates will rise. 

But here is something YOU MUST consider about all of what I wrote. 
-- If a home today is worth $600,000 and you put down 20% for a loan of $480,000 and interest rates to purchase it are 3.5% then you will be paying about $2,155 per month for your mortgage only.  Over the life of the loan you will pay about $776,000.
---If next year that home is worth $560,000 and you put the same 20% down for a loan of $448,000 and the interest rate is 4.5% then you will be paying about $2,269 for the mortgage only.  Over the life of the loan you will pay about $817,000.

So, yes I think we are seeing top prices for homes.  But take everything else I said and use it to make an informed decision that is best for you.

If you are looking to buy or sell, please give me a call. 

 Photo by Morning Brew on Unsplash