Archive for the ‘housing market predictions’ Category
Friday, August 18th, 2017
The real estate market is going CRAZY…well, at least in my local area. After over a year of increased prices and low inventory, multiple offers and crazy shenanigans so that people can get into homes, there are some strange things going on all of a sudden – since the start of August.
Here is what I am seeing in the San Diego market:
Longer market times – Many homes are taking longer to sell compared to those that sold just within the last few months. Even neighborhoods where homes were literally receiving multiple offers on the first day on market are sitting now. Many eventually reduce and on the average I am seeing some homes take around 60 days just to go into escrow.
No more multiple offers in most cases – You would think that the continued lack of inventory would make multiple offers a common occurrence still, but many homes are sitting on the market and reducing prices before they finally go into contract.
Lots of price reductions – I am seeing this all across the board – from condos to single family homes to 2-4 unit income properties. Sellers continue to hit the market with high prices – at comparative sales value or higher – only to have to reduce after 30 days or so due to lack of offers.
Buyers are making low offers – This is for real folks, so if you are a seller be prepared! It is happening all over. I think buyers are tired of rising prices and competition for homes, and they are starting to feel that if a seller won’t take a lower offer, they won’t buy. This is also true with short sales, even though banks no longer accept crazy low offers like they once did years ago.
Escrows are cancelling – I have seen this first hand with my own listings and I have heard from other agents as well – buyers are cancelling escrows at what seems to be a higher rate than we have seen in a long time.
I have reached out to other agents and escrow officers and it seems I am not the only one who feels the market is in such an interesting place. Many agents feel that August has always been a slow month for real estate sales – the end of summer with last vacations prior to kids returning to school, visitors leaving the city, etc. (here in San Diego we have a LOT of summer visitors!)
But there are some who think that this change is indicative of what is to come. Many buyers who were unable to purchase homes due to lack of inventory and multiple offer situations, have decided to rent and wait until the market drops or until there is more inventory available (which really goes hand in hand with prices dropping or at least stabilizing).
I will reiterate my belief, as stated in many blogs, that I do not think we will have a bubble burst or a housing crisis in the near future, but I do think tides are changing. A buyer’s market is starting to blossom and at some point it will flourish. If inventory picks up it will only fuel the change.
Thursday, March 16th, 2017
As many in the real estate industry anticipated, the mortgage interest rate has been raised, and predictions are that rates will go up again, possibly multiple times this year. What does that mean for home buyers, sellers and the real estate market in general?
1. Inventory will likely remain low. Since inventory in most markets is already low the rise in rates could keep it that way. That is because home sellers who were considering selling may choose to stay in their homes. Those who have low mortgage rates currently may decide not to make aÂ move if their new rates will be higher – it will all depend on numbers for many sellers. OR – there is always a chance that rising rates may cause some to sell quickly in order to prevent being locked into their homes for potentially years to come…it will remain to be seen.
2. People may be priced out of markets. If there are fewer homes on the market then home buyers will have a more difficult time finding homes due to high demand and low supply, which normally creates higher prices. As competition heats up, some buyers – likely many first time home buyers – will be priced out of the housing markets in many areas. Unless home builders supply the market with new inventory there could be a stall ahead.
3. Cash buyers will continue to play a role. In many markets, especially condo and townhome markets priced at $650,000 and under, I believe cash buyers will continue to be out in force snatching up these properties. Many first time buyers will have to contend with these cash buyers, and usually that is a losing game for the buyer who is getting a loan (since cash buyers do not require appraisals and can close more quickly; not having to rely on a lender to get the sale closed is a plus to many home sellers).
4. Rental market will continue to be saturated. If the above holds true then the already saturated rental market will continue to be busy – landlords will be able to make good money and raise rents because there will be plenty of renters needing homes who will pay the higher prices if current tenants cannot. This point correlates with the increase in cash buyers that we have seen lately in the “lower end” markets – many of them have been purchasing the lower priced properties for income potential, and it is a great time to make money in the rental market.
5. Real estate industry could see changes. With less inventory real estate brokers and agents could see a big change in the industry. Much like the exodus of sales people during the foreclosure crisis of 2008-2011, I predict many agents will again leave the business because they will not be able to survive in such a tight market. I also predict agent commissions will go down if there are fewer homes which sell faster.
The bottom line is that the real estate market in many areas, at least here in San Diego County and others in California, is still “hot,” but it is getting more difficult for people to get into it. This could affect future home ownership rates and the real estate industry as a whole.
Wednesday, December 21st, 2016
If you are like me you are surprised we are at the end of the year already, but the good news is that the real estate market fared well this year, and will likely continue to do so in 2017. Here are my annual predictions for the market, at least here in San Diego County:
1.Â Home inventory will remain low. Due to a combination of factors – rising interest rates, expenses of moving up and difficulty of finding replacement housing, many potential home sellers will likely choose to remain where they are and not sell. This trend defined the market in 2016 and I believe it will continue. Until Americans see how the new President will affect the market I am betting on this.
2.Â Prices will stabilize for the most part. 2016 saw prices still rising slightly in some areas, and higher in others (especially in summer months), but for the most part things seem to be leveling off. I think we will return to “normal” annual price appreciations of 5-7%. Of course this is always area-dependent so check with your local realtor for market statistics and area comparables.
3.Â Market times will decrease or remain low for desirable homes. Due to the continuation of lower inventory levels I believe we will see desirable homes sell quickly. But I also think that buyers are very savvy and will not pay crazy high prices either – although in a multiple offer situation you never know.
4.Â First time buyers could have a difficult time with competition. As interest rates rise, inventory levels decrease (or remain low) and prices remain high, many first time home buyers may find themselves in challenging situations when looking for homes to purchase. Competition will also factor in, especially in areas where there is an influx of repeat homebuyers who are moving up and are well qualified (with large downpayments). My advice is for those first time buyers to get preapproved and start looking now. Click here to read more on how to “win” that home you want.
5.Â Interest rates will rise. This is inevitable and we have already seen the beginning of the end of the lowest interest rates in history. The new administration will also play a role in the interest rate rise as economic goals fluctuate.
The bottom line is that I believe the housing market will do well in the coming year. I do not predict any “bubbles” as some (very few) have done. I think here in San Diego County our market is strong and will continue to be as we head into 2017.
As I always say, if you are thinking of buying or selling in the future you need to do your homework and start early – even a year is not too early. Study the markets, visit homes for sale, get to know inventory, neighborhoods and floorplans. Talk to a mortgage professional and plan ahead. Find a great local real estate agent and let him or her keep you informed so you are ready to go when the time is right. Be prepared and have a wonderful new year!
Tuesday, December 8th, 2015
Around this time of year there are numerous posts on real estate market predictions for the coming year, so yes, this one will join the club. But it is important to note that in my opinion, one can only attempt to make accurate predictions (keeping in mind that no prediction is ever accurate) at a hyper-local level. I cannot predict what is in store for the market in Columbus Ohio or Memphis, Tennessee. But I can give a pretty accurate prediction for San Diego County, California.
This past year the San Diego County real estate market has seen great improvement, with Spring and Summer sales contributing to the annual state sales growth of 7.2% (some areas exceeded that number). We also saw many multiple offer situations in the high season. That has calmed down as we headed into and through the Fall season, but there are still buyers out there now and properties continue to go into escrow – since Thanksgiving the market has really picked up in North San Diego.
Here are my predictions for 2016:
1. Steady sales. As we head into 2016 I think real estate sales will remain steady. As long as there is not a major financial situation or big rise in interest rates (which I doubt), I think we will continue to see sellers listing homes and buyers making offers. Homes that show well, or homes that are priced very well for what they offer, will continue to generate sales. I believe price will play a big role – gone are the days of sellers listing over comparable market price (unless of course the home is unique – big ocean view, fully upgraded, etc.). If you are a seller and want to sell your home, it will be all about price- more so than ever.
2. “Normal” price increases. I think prices will remain relatively steady, barring any major crises in the economic sector. I believe we will see possibly a 5-6% growth in prices overall in 2016, which is considered “normal” in many markets. San Diego will always have a slightly higher increase in annual sales compared to some other areas of the country, due to location and weather.
3. Inventory growth, albeit slowly. Over the last few years there has really been a slow down in inventory, although 2015 showed some positive signs of increases. I think as we head into 2016 we will continue to see slight increases, as people continue to feel more confident in the economy. Rising rates could spur potential sellers to list their homes before rates get too high (although I do not believe that will happen – but of course even slight raises could spur fear of bigger ones, which means fewer buyers).
4. Rising interest rates. There has been a threat of rising rates for some time, but I think in the coming year we will see slight increases – at least one, maybe twice. This should spur some buyers to jump off the proverbial fence, but could also cause others to jump up there. It would likely create inventory growth, as sellers fear the latter scenario.
Overall I think 2016 will continue to be a positive for the real estate market in San Diego county. In areas such as this – with our proximity to the coast and beautiful weather – there is never a true slump. If you are considering selling or purchasing a home, regardless of where, consult with an experienced real estate agent to get an accurate market snap shot so that you are prepared. Happy New Year to you all!
Monday, July 20th, 2015
The real estate market has been literally HOT for some time now – both 2014 and 2015 have shown record sales and that doesn’t seem to be slowing down. It is still a seller’s market, inventory and interest rates are low, and it is the prime “selling season.” But how long can this last?
There are several factors that could have an impact on our real estate market moving forward. Let’s look at those and analyze the possibilities:
1. New federal government policies. There are 2 big policies that are about to take effect which could have an impact on real estate sales. One of these could actually stimulate more sales because it advocates lower downpayment requirements and loosens up loan underwriting standards, which could help buyers, especially first time homebuyers, realize their homeownership dreams.
The other program on the horizon could have a detrimental affect on real estate sales. Home buyers and sellers will face a new hurdle in the sales process, one that could extend escrow periods – possibly for lengthy periods – and may cause other delays and issues.Â New requirements are being implemented that will make loan disclosures much stricter starting October 3, 2015. While the theory behind the disclosures makes sense, the implementation is sure to cause many headaches. In a nutshell, every time there is a change to any terms in the purchase contract, the borrower will receive new disclosures, and with it a new period to review them, which could extend the buyer’s contingencies for lengthy amounts of time, thus extending escrow periods.
For example, say you are purchasing a home and everything is going along well, and you have a few days left to remove your contingencies. You have a home inspection and there are repairs you feel the seller should make, so you present a repair request. The seller agrees to credit you money toward closing costs so you can repair those issues after the close of escrow. Your lender will now have to issue new disclosures to you because you are changing the terms of the contract (by getting a credit back through escrow), and you will have more time to review these new disclosures. This will extend your contingency period – it is risky for sellers because it means their homes will be held up in escrow for longer periods, or at least they will be off market without a non-refundable deposit for a longer period of time. For more information on this topic visit the Consumer Financial Protection Bureau.
2. Foreign investors: Over the last few years foreign homebuyers have invested quite a lot of money in U.S. real estate markets. But with the strengthening of the dollar and weakening of other currency, there are many economists who predict these investments will start to ebb.
3. Decline of new construction: New construction has picked up in some places over the last few years, but in this seller’s market it is not increasing at a rate to keep up with demand for homes, especially entry-level properties in many markets.
4. Interest rate changes -? At some point rates will need to move upwards, and this could obviously put some entry-level buyers out of the market. While it doesn’t look like this will be the case any time in the near future, it is inevitable at some point.
I feel that the current market will remain strong moving forward, at least for some time. With the new policies and state of the factors mentioned above it is foreseeable that things could slow down possibly in a year or so. But like I always say, location is a big part of the picture – here in San Diego we will always have a desirable market due to our weather and proximity to the ocean. For specific market news and predictions in your hometown, consult a licensed and experienced area real estate agent.
Thursday, January 1st, 2015
2014 was a positive year for the housing market, with many areas experiencing recovery and more houses selling than previous years. Prices rose quite a bit, and there was a lot of conflicting news about the future of housing. Now, as we head into 2015, many wonder what is in store for the housing market. Of course I do not have a crystal ball, but based on what I see in my local market here is what I think we will see as we head into the new year.
1. Price Increases Will Slow Down
Buyers were out in force on a pretty consistent level in 2014 here in North San Diego. We saw increased competition for listings, multiple offer situations, interest rates remained low, and prices jumped. Heading into the new year I believe prices will continue to rise, however in a much slower (think “normal”) manner. There are two factors that contribute to this: the exit of many investors from the market and lower inventory levels. According to Case-Schiller prices on a national level are near their spring 2005 levels; the 20 cities tracked by the real estate analytic giant are about 15% to 17% off their mid-summer 2006 peaks.
Zillow predicts prices will rise this year about 2.5%, while Relator.com thinks the number will be closer to 4-5%. The California Association of Realtors predicts that single family home prices will appreciate 5.8% in 2015 – that is a lot less than the appreciation this year, which statewide climbed to almost 12% (obviously some areas were higher than others, like San Diego, Orange and Los Angeles counties, and parts of Northern California). Moving forward the market will likely follow a more “normal” growth pattern as predicted.
2.Â Homebuyer Pool will Increase
2014 saw quite a gain in the number of homebuyers – low rates and lower inventory levels had many people determined to purchase before prices jumped too high. Since the majority of investors have left the housing market (due to rising prices and the inability to get a great “deal,”) rates are still low and credit rules have eased, I expect we will continue to see an influx of ready, willing and able buyers to the market. These factors will lead to increased inventory levels, which means that more sellers will list their homes and be able to find replacement properties (one of the biggest challenges for sellers last year was that there was so little inventory that they had nowhere to move to if they sold).
3.Â Affordability will Decrease
Along with more inventory and a stronger market, I think affordability will worsen. Just because housing market prices are rising does not mean that buyers’ income is rising in sync. With rising prices, even though the rise will be slower, buyers whose incomes remain the same will not be able to afford the homes they may wish to purchase. When mortgage rates start to rise that will add to the challenge. Realtor.com thinks that affordability will decrease 5-10% in 2015.
4. Mortgage Rates Will Rise
This is inevitable. Those who are sitting on the fence need to start looking now before rates rise and affordability decreases. Freddie Mac predicts a rise to a 4.5% interest rate this year, while others (like the Mortgage Bankers Association) predict rates will hit 5% by the end of the year.
Market stabilization should generate more inventory as we settle into calmer housing waters, as sellers realize the price frenzy is now over and there is no longer a need to wait and see if prices will continue to jump exponentially. Buyers who have been considering a home purchase will likely jump off the fence to do so before interest rates rise – which they will. The slowing down of price jumps could be a big benefit to the market as a whole, bringing us back to a much more “normal,” thus safer-feeling market.
Wednesday, October 22nd, 2014
The last few months have been very busy for the real estate market. Many areas seem to have corrected and although prices did rise through the summer it seems that now they have stabilized in many areas. The one thing that still seemed strong was demand, as buyers were still out there looking at homes and shopping. Until about a week ago.
I have noticed in the last week a drastic slow down in showings and phone calls, as well as new listings. When interest rates dipped under 4% last week I thought it would spur buyers and result in more pending properties, but that does not seem to be the case in my area. Here are some of the challenges that could be having an effect on the market:
Bond Market Collapse – Last week the bond market took a substantial nose dive. Did this create fear about the housing market? It is possible, but one has to consider that all markets are cyclical, and unless we are talking about a full blown economic crash it is doubtful that the one will affect the other.
Challenges in International Markets – There are still many European countries that are facing difficult economic times…could this create fear amongst US buyers? Possible, but again it is important to realize that our housing market just underwent a big correction and now is back on the track to normalcy, so fears about other markets outside of the US should not have an impact on whether or not a buyer purchases a home.
Time of Year – Typically the Fall-to-Winter housing market tends to be slower and include lower inventory. With the holidays and the end of the year many sellers choose not to list or take their active homes off the market. Many people are not thinking about purchasing homes at this time of year, except those who need to (and actually, if you can do it, it is a great time to sell…click here for more information)
Lack of Inventory – This definitely could be a reason why the market seems to be slowing. Summer did finally see an increase in inventory in many markets that had been in an inventory slump for a while, but there are fewer new listings now; this could be due to a variety of factors, most notably the time of year. Once the holidays have passed we should slowly start to see inventory creep up, as we head into the Spring and Summer.
Fear – There is still talk out there of a housing bubble, believe it or not. This could be creating fear amongst buyers, and in addition to any of the above categories could combine to make some think they’d better sit on the fence for a time and see what transpires. Personally and professionally, I do not agree with this viewpoint. I believe most markets HAVE stabilized, and that we have returned to a more “normal” housing market. I do not believe we will see more than a 3-5% annual price increase moving forward from year to year. Those who are in the market solely to make a profit won’t have much opportunity to do so, but conditions will be perfect for those who are purchasing with long term benefits in mind. There will always be issues and problems that could affect housing, BUT housing is still historically one of the most stable markets in which to invest.
The bottom line is that buyers need to feel comfortable when they are contemplating a home purchase. Sellers also need to feel comfortable in listing their home. Overpriced homes will not be sold in the current market; of course there are always exceptions, but in general we will not see this happen now or in the coming year, in my opinion.
The key for any buyer or seller is to get educated on the neighborhoods in which they are focusing their searches, and to really understand comparable values. Working with a skilled area agent is the first step in the right direction. BuyingÂ a home can feel scary, but in reality it should not be a difficult decision for those who understand the local market. Renting has been proven to be more expensive, but is also more risky -rents can be raised, leases can be terminated, and rental properties can be sold, leaving tenants to find another – which is no easy task.
Thursday, January 2nd, 2014
Happy New Year! I cannot believe 2013 is over – it seems to have gone by so quickly, and now it is time once again for my New Year’s housing predictions. I must say a few months ago I was not so sure what the market would look like in 2014, and I thought it might end up being a slow year. However, the last several months have altered my opinion and I am excited about housing in the coming year. Here are some of my thoughts as to what may happen.
Buyer numbers will continue to stay strong. Judging from the frenzy in the last few months, combined with the low inventory levels common for this time of year, I think buyers will still be out there looking for property. The prospect of inventory surges has many buyers excited and ready to pounce. They especially will want to get into contract and lock down their rates before they begin to escalate, so I predict market times for desirable listings will continue to be shorter than normal (I am referring to the local North San Diego market, which has seen shorter market times in recent months – if you reside elsewhere check with your experienced real estate agent for specific data).
Interest rates will rise. You have all heard that rates will likely rise this year…it is pretty much inevitable. What we don’t know is when or by how much, and a lot of that depends on the economy in general (specifically jobs), and the strength of the housing market (which is multi-faceted – including resale, new construction, distressed properties, loan origination difficulties, etc.). The fact is that there will be escalations, and this tends to make potential buyers nervous, as they could price some out of desired markets and make loans harder to obtain. For this reason I think the buyer pool will stay strong and active. Capital Economics predicts that rates will reach 5% by year end, and 5.5% by the end of 2015. They also point out that higher rates could be a benefit to borrowers by causing a loosening in mortgage credit conditions due to fewer refinances.
Home prices will remain level or only increase slightly (“normally”). I am sure you have heard that the great climb is over, and I agree – prices will likely level off and only climb at normal paces – 4-5% a year. Capital Economics predicts that for 2013 home prices will be up by 11%, and that this year will slow to around 4%.
Investors will ease back, opening up inventory to first time and repeat buyers. The time for investors to snatch up great deals is pretty much over. There could still be some investor activity, but for the most part most investors will begin to back off . [If you are wondering where I get this information it is from my own investor clients, and from my first time homebuyer clients, who do not seem to have that cash buyer competition like they did for the last several years.] The exception is buy and hold investors, who need to sink their money somewhere for tax purposes. They will be looking for stable investments, and I think will focus on multi-unit properties like duplexes, triplexes/quads, and in some areas even apartment buildings. But looking at the big picture, I believe we will see less investor activity this year than we did in 2013 and especially 2012.
Distressed inventory will probably not rise. This category is a bit questionable because there are several factors in play that will determine what will happen to distressed inventory levels. For the most part, I think distressed inventory levels will remain lower, and in most areas we will not see excessive foreclosures and short sales. The surge in the market brought many homeowners out of negative equity, and allowed many to sell. Of course, changes in the economy (especially the job market) could have an effect on foreclosure activity. I also think the programs out there to help distressed borrowers could help people avoid foreclosure if used properly and early on. This prediction is based on the local market here in San Diego, and may be different in other markets.
Overall I believe this year will be another great year for the real estate market, and I am excited! Housing is still a great value, and the National Association of Realtors reports that housing has never been as affordable as it is now – in their past 40 year history. I hope you all have a wonderful year – good health and lots of happy times.
Thursday, August 8th, 2013
For those who are regulars to my blog, I have predicted that home prices will soon stop escalating and will return to a “normal” growth, one that ascends slowly but steadily over time. I predicted we would start to see this by the end of this year, and especially heading into 2014. It appears that it is starting to happen right now, even in light of a new study that says that Americans believe housing prices will continue to rise despite rising interest rates.
Clear Capital predicts that home prices across the country will “experience more moderate and sustainable increases” for the remainder of 2013, as we slowly transition into this “new normal” of slower and more consistent gains moving ahead into 2014 and beyond.
In the short term many areas will likely continue to see price increasesÂ through the end of the year, despite the rise in interest rates. This could be due in part to rising inventories in many areas. Another explanation is that the rise in interest rates, along with the commonly held notion that these rates will continue to rise with time, may actually push buyers to make purchases in order to avoid higher rates. Likely, many sellers may see this as an opportune time to unload properties while the market is still rising and before rates climb higher, which will undoubtedly price some buyers out of the market.
As rates rise and inventories increase, we may also see a shift in the market, from a seller’s market (which we currently are experiencing in many areas, especially here in the western states), to a buyer’s market. Heading out of the summer buying season and into the Fall and beyond to the holidays, this is a realistic possibility. Demand will of course also continue to be fueled by the strength of local economies.
Interestingly, a study by Fannie Mae in July, the National Housing Survey, found that despite rising mortgage rates, consumers believe that prices will continue to rise. 53% of those polled thought that prices would rise in the next year. Those expecting prices to drop came to under 6%.
All in all, it is still a very interesting time in the housing market. I stand by my theory that prices may continue to rise through the end of the year, although possibly not as drastically. I believe we will continue to see inventory levels inch up in many areas, and that as we head into 2014 we will see prices stabilize somewhat, although I do believe tight lending standards could effect the state of the market as well (a topic for another blog). From there on out I believe we will see a more “normal” market moving forward, meaning one that grows slowly and consistently over time.
If you are thinking of buying or selling it is important to contact a knowledgeable Realtor and mortgage professional in your area to understand the makeup of your specific area.
Sunday, March 3rd, 2013
There are many people who feel we are headed toward another real estate bubble. With scare inventory, increasing prices, bidding wars, multiple offer situations, governmental programs falsely inflating prices, and buyers willing to pay over appraised value to purchase a home, it is easy to see why many feel this way.
Today’s market is very different from that of the early 2000s. Let’s look at the differences to determine if a crash is likely:
1. Scarce inventory. The lack of inventory is problematic, and it is the biggest issue amongst buyers’ agents. It has led to some desperate measures on behalf of many borrowers in order to get their offers accepted in multiple offer situations, which are common (see below). Back in the early 2000s we did not have inventory issues. People were selling homes right and left, moving up. The ease at getting loans made it simple for almost anyone with a job to jump into the game and purchase a home. Today’s scarce inventory is definitely driving demand, but there are other factors that prevent the frenzy we witnessed years ago.
2. Tighter lending standards Back in the early 2000s, lenders were heavy players in handing out loans to anyone, even those who were not really qualified. Inventory was not scarce like it is today, and loans were very easy to obtain, with no-doc loans that bypassed employment and income verification – types of loans that are pretty much impossible to get today (unless one wants to go through a private lender and pay a very high interest rate). Today it is not easy to get a loan; even with strong employment history and good credit would-be borrowersÂ have to jump through hoops.
3. Stricter appraisal standards. In the early 2000s appraisal standards were very loose – we saw drive by appraisals, and basically many appraisers were just gold stamping contract prices without deep scrutiny. Today appraisers will not do so, and must adhere to strict guidelines. Prices have increased in most areas, and appraisers do take this into consideration, but it is no longer a free for all when it comes to appraisals. The appraisers with whom I have spoken say they are not 100% caught up with what is happening in the market, and guidelines prohibit them from looking at only the last sale, which may be tens of thousands of dollars higher than other sales in the neighborhood in the last 6 months…thus they have to look at both in order to assess value.
For example, let’s say in your neighborhood 4 similar homes sold in the last 6 months at close to $450,000. A fifth home, also similar to the other four, then closes escrow at $500,000 (there could be many reasons for this – bidding wars, cash buyers, buyers paid over appraisal value, or a government agency could have falsely inflated the price – click here for more information on this.) You decide to listÂ your home now, based on the $500,000 sale, and you do so. A buyer comes along who offers that price, but the home appraises lower. This is because the appraiser will look at all five sold properties, not just the last sale.
4. Buyers paying over appraised value. Many buyers don’t care what the appraised value is, and they are willing to pay the cash difference between it and their loan amount. This has been common in many areas, and is a factor in increasing comparable value. This tactic puts those buyers in the most expensive homes in their neighborhoods (which is never a goal, but what many feel they have to do to get their contracts accepted today). Back in the heyday of the early 2000s we didn’t really see this issue because we didn’t have appraisal issues. So this time around it is the buyers who are driving the prices higher due to the lack of inventory and the high demand.
I believe that we will not see another housing crash, based on the above factors. What I think will happen is that we will see the higher prices and lower inventory for a while, possibly until the end of this year, and then at some point things will level off. Many homeowners who have been underwater (their home is worth less than their mortgage balances) will find themselves no longer so due to rising prices. This will allow them to sell their homes, creating more inventory and less distressed property. At that point prices will simmer and stop escalating, and we will finally see a return to “normal” market trends.