This is Not Looking Like a CRASH!

This week I want to review a slide that we’ve talked about before: the blue line is the price action on a typical house in the Temecula/Murrieta area. Even though the chart shows local details, it is what we are seeing nationally. Of course, there are nuances depending on the location in the United States.

Then, the red line is 21 years of flat, 4.5% growth – which is a good number to be aiming for in terms of long-term real estate growth.

2 Things are Happening Right Now

I want to point out two interesting factors that are happening in the real estate market.

1. Buyers are Fearful of a Crash: There is a lot of talk about an impending crash in the market. Are these fears real?
2. It’s Too Overpriced: Another point of conversation is that the prices aren’t going to hold. Prices have to come down eventually.

But the numbers beg to differ. We are currently 4.6% down from the peak point on the chart. This drop was to be expected.

Of course, this time of year, we typically get a bounce, and it is reflecting in the numbers. Some people were unsure if we would see the bounce this year because of where interest rates are at the moment. There’s no question that one reason this bounce is happening is because of lack of inventory: there are so few houses available for sale.

Where Will Inventory Come From?

What worries me is that there aren’t a lot of places the inventory will come from right now. I am almost worried about interest rates coming down, because if rates come down then it’s going to drive a bunch of people in who are ready to buy.

Maybe, if interest rates come down enough, people with rates in the 3% range will decide to make the leap into another home, which will free up inventory.

To be clear: it’s never a straight line and I am not predicting that we will start skyrocketing. But I am saying that as far as prices continue to drop, we’ve hit that point. When inventory is so low, it’s a simple supply-and-demand situation.

We will see what happens! If you have questions about buying or selling a home and your options for financing, then reach out to me any time for a conversation. I’m here to help!