03/31/2021
Raise your hand if you thing the current housing market is nuts! 🙋♂️
My question to you is, is it sustainable? Will it continue? Will it hold? Or when does the dam break?
These graphs are telling. In full disclosure, I don't have a crystal ball (disappointing right?). But we can look at a few factors that will help us understand WHY the market is behaving as it is, and HOW that affects the average person.
A few things to understand...Covid and Millennials. Both have a major impact on our current situation. Covid drastically reduced the number of people looking to sell their homes in 2020. We were all cooped up for a year and moving in the middle of a "pandemic" didn't make sense for the majority of people. As a result, there were fewer homes available on the market. On top of that, many lumber mills in Canada and elsewhere shut down production, which is driving up the price of lumber for new construction homes.
At the same time, Millennials enter the equation. We've all heard of the "baby boomers" right? Well you may not no that the Millennial boom is actually larger (69 million boomers vs 72 million Millennials). The largest segment of home buyers in America (as well as in Southern Utah) are currently millennials. The average age of a home buyer is...... You guessed it, 34 years old. Millennials are now between the ages of 25 and 40. For the next 3 YEARS, we will have a record breaking number of individuals entering the housing market. So what do you think? Demand will be INCREASING and supply struggling to keep up.
With less than 20 homes on the market in St. George under $300,000, bidding wars are insane! We just had a client pay $50,000 over appraised value because they were desperate to get into a home. Does that sound crazy? yeah, it does. But looking at the graph below, We are looking at a 20% appreciation rate over the next 5 years. So the buyer who just paid $50,000 over appraised value, will actually have positive equity in about a year.
Is this reminiscent of 2008? It kind of feels like it right? But it is a completely different beast. This is all about supply and demand, not sub-prime lending or risky real estate investors leveraged to the hilt.
I'd love to hear your thoughts on the matter! Again, I don't have a crystal ball. I personally feel that the market is appreciating too much, too quickly, However, I don't see a short term speed bump to slow things down. Those sitting on the sidelines waiting for a correction, may need a comfy seat and some popcorn as you may be waiting a wile! 😉
Brandon J. Griffiths / Envision Home Loans
Jessica Griffiths / Red Rock Real Estate / St. George UT
