The short answer is… not in the foreseeable future. I’m not an economist so I can’t know for sure, but you won’t find an economist that will tell you they know for sure either. All I can do is present to you the same facts that the economists (multiple “experts” from the National Association of Realtors, the lending and banking industry, and private business economists from companies such as Goldman Sachs and Zillow) present to real estate agents every week.
To be clear, what we mean by less competitive is that the market will move from a Seller’s Market to a Buyer’s Market. Right now, we are in a Seller’s Market and we have been in one for since about 2013 when interest rates first reached around four percent. By having kept the interest rates under five percent since 2010 we as an economy have experienced a prolonged recovery to the Great Recession between 2008-2010. During the last 10 years, we have had many more buyers in the market than homes available to buy. For more information on the differences between a buyer’s and seller’s market you can read the article, Why Is Understanding Inventory Important? The low inventory was also exacerbated by the Baby Boomer generation choosing to refinance their homes in the last three years rather than sell and buy something smaller.
I believe that the data and evidence is showing us that the generations that have come after the Baby Boomers will also have a great effect on the future market switching from a Seller’s Market (when buyers don’t have to compete) and a Buyer’s Market (when a buyer will have to compete with other buyers). Look at this graph below of the different generations. You can see how the Millennials and Post-Millennials almost equal the amount of Baby Boomers and Generation X numbers. The problem is that the number of Baby Boomers (assuming we take the population number as total potential homeowners) is not as full as the other numbers. Meaning, many of the 76 Million Baby Boomers born since 1945 have since past away due simply to illness, age, and more time living where things go wrong. In addition, the Baby Boomer generation bought houses as married couples more often than not.
The Millennial generation, however, have just started their home buying journey. As a generation, they are more likely to buy a home before getting married, and many will choose not to get married at all. Statistics show us that there are many more females choosing to buy a home on their own than previous generations. All this is to say, if there is a housing shortage today it is only set to get worse from the numbers of future home buyers entering the market.
So when is the best time to buy a home? The answer is the same as the Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” Every week or month you wait to buy a home or invest in real estate you are waiting to compete with more buyers entering the market. Right now there is a bit of a reprieve because buyers in today’s market are not used to interest rates being higher than four percent. The economists are not expecting interest rates to go lower than 5.5% in the next few year. Right now as the Federal Reserve battles inflation, they are raising and keeping interest rates high at around seven percent. Expect them to stay around this point for the next year or two while inflation slowly goes down (The Fed started raising interest rates a year ago already). As many buyers come to the realization that the era of sub-five percent interest rates is over, those that were shopping before for that bigger home, or smaller home, will reenter the market as well. You can see the historical interest rates below.
If you know you want to be a homeowner in the next ten years, I recommend you buy now and enjoy watching your appreciation and equity increase every year with the new crop of buyers others have to compete against.
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