There aren’t that many products in which consumers read about or hear on the news whether people think it’s a good or bad time to buy them. Supermarket shoppers don’t normally wonder whether they should or shouldn’t get grapes or paper towels based on the opinion of others. And it’s unlikely that many folks take under advisement what strangers think about their contemplating purchasing a car.
Yet when it comes to deciding when it’s the right or wrong time to make a residential real estate investment, everyone has an opinion. Or so a new Gallup poll would have you believe. Unfortunately for REALTORS®, they’re the ones who must explain to wary clients why heeding such a report’s findings is not only misguided, but could severely hinder their financial futures over time.
The results from Gallup’s annual Economy and Personal Finance poll showed that only 21% of U.S. adults think now is the right time to buy a house, down from 30% a year ago and only the second time the figure has been below 50% since 1978, when Gallup first asked the question.
When Gallup first asked Americans about their perceptions of the housing market in 1978, 53% thought it was a good time to buy a house. Thirteen years later, when the question was asked again, 67% held that view. The record high of 81% was recorded in 2003, at a time of growing homeownership rates and housing prices. As housing prices rose sharply in the mid-2000s, creating a housing “bubble” and leading to an eventual market crash, positive evaluations of the housing market fell to the low 50s.
Additionally, Gallup noted that all major subgroups of Americans are significantly less positive about the housing market now than they were a year ago, with the percentage saying it is a good time to buy a house dropping at least 17 points in each of these groups. Certain subgroups who were more positive about the market in 2021 have shown slightly larger declines, including Midwest residents, suburban residents, upper-income Americans and homeowners.
RISMedia spoke with several REALTORS®, all of whom strongly disagreed with the idea that buying a home right now could be a mistake, while also lamenting that the poll’s negative tone only made their jobs more time-intensive.
“When my clients ask me if it is a bad time to buy property, I tell them that rather than listen to a sound bite or headline, consult a professional,” says Jeffrey Decatur, a broker associate with RE/MAX Capital, in Latham, New York. “Sound bites typically focus on attention-grabbing words like ‘decline,’ ‘increased costs’ and ‘rate hikes.’ But when it comes to real estate, it is hyperlocal. Despite confusing headlines, the fact of the matter is most markets are still experiencing a lack of inventory and appreciation. Interest rates are higher but not too high, and are still incredibly low in comparison to historic highs. Real estate is one of the best investments, backed up by the fact that the average homeowner has a net worth substantially higher than that of a renter. And rental properties generate income monthly, with the benefit of tax write-offs.”
Debbie Lang, an agent in the Princeton office of Berkshire Hathaway HomeServices Fox & Roach, REALTORS®, points out that real estate has proven its value over time, so just like stocks, there is not a bad time to buy as long as you’re not looking to just make a quick score.
“Buying real estate is how most of the wealthiest people in America made their money,” she asserts. “I have a wonderful magazine article that I saved from years ago, titled, ‘To Buy or Not to Buy? That Is the Question.’ It is about a man who thought everyone was foolish paying such high prices for real estate on an island. He thought prices were so high that they could never go higher. The island he was speaking about was Manhattan, and the article was written over 100 years ago. I give a copy of this article to hesitant buyers to read.
“All you have to do is look at the long-term graphs on real estate in the United States, and it always curves up. There may be peaks and valleys, but the line shows how over time it goes up. It’s the best investment you can make to build equity for retirement,” adds Lang.
Gallup’s bottom-line summary to its poll about buying a house right now was not very optimistic. However, it did report that as they have each year since 2014, more Americans choose real estate (45%) as the best long-term investment than stocks (24%), gold (15%), savings accounts (9%) or bonds (4%).
Gallup first asked Americans to pick among these five investment options in 2011. Real estate trailed gold in 2011 and 2012, and it essentially tied gold and stocks in 2013. Since 2014, no less than 30% have chosen real estate as the best long-term investment, with the percentage exceeding 40% for the first time last year.
“Fewer Americans now than ever before believe it is a good time to buy a house,” the company summed up. “The past two years are the only times Gallup has found less than half of Americans endorsing a home purchase in the prevailing housing market. These bleak homebuying assessments are fairly uniform across most subgroups of Americans.
“It is likely that Americans’ pessimism about homebuying reflects the high prices and high interest rates that are conspiring to make mortgage payments less affordable. These attitudes may keep many prospective homebuyers out of the market.”
Bonnie Mays, CEO and a REALTOR® at United Real Estate Louisville and Lexington, Kentucky, points out that homebuyers normally need and want to find the right property and get settled as quickly as possible.
“Because housing is a very basic need, there is not a bad time to buy a house,” she says. “The interest rate increase over the last few months has caused Americans to focus on the number, the rate, and not the impact of the rate on their buying power or lifestyle. Life events impact when people need to move, and those people are successfully navigating the financial requirements.
“Home equity as a wealth-building strategy is greater now than in many years,” adds Mays. “Americans thinking they can ‘wait out’ the rise in interest rates are misinformed about the benefit of gaining wealth with equity increase. Today’s market is different, and budgets may have changed because of interest rates, but it is still a great time to become a homeowner.
“Historically, the wealth that has been generated in our country has been generated through real estate,” she continues. “All Americans need to live somewhere. Building wealth through residential real estate is a healthy long-term investment with minimal risks.”
Decatur agreed that regardless of any lulls in the market, owning residential real estate makes sense in order to build wealth, so those considering buying now should pull the trigger.
“According to National Association of REALTORS® economists, there is still a substantial lack of inventory nationally,” he says. “So is it a bad time to buy? In my opinion, no. Typically, real estate appreciation outpaces inflation and creates equity. Everyone is paying for equity; it is just a matter of whether it is yours or someone else’s. Again, you have to educate clients and help them interpret what the market is doing locally.”
“They are not making any more land, so if you buy in the most desirable locations, over time, and ‘time’ is key, your investment will always go up,” she says. “I have experienced the ups and downs of the real estate market over the past 36 years. There is no question that building equity is by far your best investment.”
To see the full poll results, click here.