REAL ESTATE MONTHLY OVERVIEW: APRIL

Let's review the market trends and insights of the real estate market during March 2021.

If we put last year on a highlight reel, a few things would come to mind. Off the top of my head, I can name two: The Mandalorian and the most affordable housing market we had seen in 30 years. Mortgage interest rates remained low and steady in the beginning of 2021. February brought on a slight rise in rates and economists predict that we will see them tick steadily higher in March. This prediction is based on a culmination of factors. Remember that old song called, “The Skeleton Dance?” Whereas the thigh bone is connected to the hip bone, the hip bone is connected to the backbone, etc.? So too is the housing market. More economic stimulus increases our national debt. This raises inflation. The rate on Treasury Bonds is on the uptick and it is directly tied to mortgage interest rates. With more Covid-19 vaccines becoming available, consumers are more optimistic about economic recovery, thus, rates will rise as economic conditions stabilize. Will a slight increase in mortgage interest rates benefit our economy as a whole? There is finally a glimmer of hope in consumer confidence with less stringent business restrictions.

There is optimism that our economy will rebound this year and the real estate market will continue to thrive. Real estate experts forecast that this will be driven in part of the increased number of the work-from-home demographic. For added insight, I asked the expert opinion of Ryan Kiefer, a 23-year veteran of the mortgage business, both as a loan officer and Branch Manager. He has appeared on Lifetime’s TV show Designing Spaces as an expert in home renovation loans. He has been featured on Lifetime’s award-winning Designing Spaces and a contributor on CNBC. Ryan can be seen regularly on The American Dream TV each week, as well as Local 12 (CBS) in Cincinnati. He also has a long running podcast, Intelligent Equity.

He speaks with sanguine expectations for the future of housing noting:

The recession in this country is over. And we are early in our recovery cycle with great things to come as the economy fully opens back up.
Any inflation uptick will be temporary and fleeting and remain low longer term. Which means mortgage rates should stay fairly low – think low to mid 3’s on a 30 year fixed. That said, clients should keep in mind that every .75% move up in rate erodes 10% in purchasing power. So if the 30 year fixed goes from 2.75% to 3.5%, which it’s just about there currently, then that $300,000 new home purchase that they qualified for now becomes only $270,000 as the same monthly payment.
Will the move higher in rates kill the purchase market and home values? No. If a 5% 30 year fixed didn’t crash the housing market in 2018, then 3.25% to 3.5% certainly isn’t going to do it in 2021 – especially since the demographics driving demand are much stronger and more favorable now.
At the end of the day, demographics drive housing, and we are in the biggest purchase market ever. At least thru 2024. This is based on the average 1st time buyer being 33 years old currently, and how many millennials will be turning 33 each year over the next 4 years. It peaks with those born in 1990 and 1991.