This month’s National Association of REALTORS® (NAR) Power Broker Roundtable dismisses some of the myths surrounding a potential real estate bubble.
Cindy Ariosa, Senior Vice President, Regional Manager, Long & Foster Real Estate, Chantilly, Virginia; Liaison for Large Firms and Industry Relations, the National Association of REALTORS® (NAR): Real estate is a series of moving parts, and the truth is, those parts have been moving so fast and furiously over the last 18 to 20 months that it’s been hard to get an accurate snapshot. It seems we are emerging from a fiercely competitive and exhausting environment into a season of relative normalcy. Is inventory beginning to inch up? Yes. Are some sellers looking at five offers instead of 15? Yes. And those are good omens in my view. Interest rates are low, there is money to spend, and a generation of new buyers appears ready to enter the market. If some media mavens are mouthing the word bubble, I think they are way off the mark.
Christina Pappas, Vice President, The Keyes Family of Companies, Miami, Florida: I agree. People get nervous when they hear the word bubble, but the indicators believe anything like that. Houses in our market are taking a bit longer to sell, but we have the same number of listings today that we had in 2019. The foreclosure rate is 50% lower than it was during the recession of 2008, and the millennials—the largest buying group since the boomers—are turning 32, the average age of most first-time buyers. High demand and low interest rates are the recipe for a continued good market.
Melanie Thompson, Principal Broker, Century 21 Real Estate, Ashburn, Virginia: The truth is, buyers are as worn out as we are at the moment. After more than a year of emotional stress, losing out on properties one after another, they are taking a little breather—so yes, there is a bit of softening in the market. But prices are on solid footing, sellers are not harmed by a more normal environment, and with more freedom to work where you live, the vacation and second-home markets are very strong.
Keith Robinson, Chief Strategic Officer, NextHome Inc., Pleasanton, California: We saw a 20 – 25% run-up in prices last year, so I agree there is buyer fatigue. But there is nothing that resembles a market getting ready to pop. There are at least four major differences compared to 2008: Individual savings rates are higher; equity rates are higher; buyer quality is better; and as Christina noted, there’s been a steady decline in foreclosures. The fact is that properly priced, move-in ready homes are still seeing multiple offers.
CA: So, frustrated buyers are no longer willing to buy at all costs, which is helping to move us back into a more traditional market environment. At the same time, we expect the ship to stay on course for the foreseeable future.
CP: The pandemic has put us in a new world. People are still reassessing their living situations and those who are able to, for whatever reason, are making the decision to live in their dream destinations. Unless and until interest rates begin to rise markedly, I expect we will see continuing demand.
MT: Low inventory has made rental prices jump to super-crazy rates. That could hurt the affordability factor, and all the forbearance during COVID concerns me. We need to caution agents early on to be certain their sellers understand exactly what their equity position is.
KR: I see the inventory shortage finally moving from hyper-low to low. But with new construction lagging, and no signs of it picking up, I don’t see any inventory solutions on the horizon.
CP: On the other hand, prices have been rising at reasonable rates, and that’s expected to continue.
CA: Valid points. But we recently returned from our first big in-person management meeting, and I’m seeing great confidence and enthusiasm from my team, most of whom are glad to see a return to a more traditional market—and that inspires confidence for me.
MT: And for me. The craziness of the past 18 months has been as hard on real estate professionals as it has been on buyers and sellers. It’s time to back up the train, take a deep breath, and get out there with a fresh, new perspective.
The Power Broker Roundtable is brought to you by the National Association of REALTORS® (NAR) and Cindy Ariosa, NAR’s liaison for Large Firms & Industry Relations. Watch for this column each month, where we address broker issues, concerns and milestones.