Why is this happening? The Real estate market in a nutshell, nationally, is in a frenzy. Multiple offers and quick sales all seem to be headline news nearly every day. Rumor has it locally here in Buffalo NY, the record for over asking price offers is $150,000 though I can only continue to pass this rumor. I’ve confirmed $107,000 over asking recently.
“This market is a market that no one has seen before. It takes skills, education, preparation, and a ton of good karma. It might be that time to start going back to church and/or praying to whoever will listen.” – A 716 Realtor
The Team: Before we go too far into why – please know buying a home in today’s market is not only achievable but it’s completely possible if you work with the best team to buy a home today. The team consists of your realtor or real estate team, your attorney, home inspector, banker, insurance agent, movers and so on.
The Pressure Effect: There are two main reasons I believe the market is exploding:
1) Rental Market: A real estate market is made up of both buyers and renters. The rental market has faced significant pressure during the COVID 19 pandemic. In WNY per the MLS there are 59 options to rent right now. Admittedly, many landlords may self-manage or lease themselves. Anyway, only 20% (12) are less than $1000 per month. Top rent is $4500/month and 10% (6) over $3000/month. RENTS ARE RISING QUICKLY and I expect this trend to continue as landlords look to make up for the pandemic effect.
2) The New Home Building Process: Those in the position to build a new home and therefore help create more inventory in WNY and the 716 have seen prices rise multiple double digits. In effect for many becoming out of reach and even then, there is a shortage of land and laborers. In short, houses cannot be built fast enough and in fact, there has been a long-term lag of new builds which has set the stage for the following:
The EXPLOSION: With rents tipping past the prices of past and so many people looking to upgrade their homes post Covid, enter the explosion. There is just not enough inventory and there will not be for some time many experts predict. The National Association of Realtors, Keeping Current Matters, and many more even predict double digit price appreciation in the next year – let’s face it wood, gas and nearly everything in this economy, is costing more. Homes aren’t excluded. So, what will it look like now vs. later?
The experts could be wrong, this “explosion” could calm and the market goes into free fall. Yes, that’s what many hope for, though, I think the experts are right – we’re just getting started.
The Cost of Appreciation: If we are right: A $500,000 house with 20% down today (sure maybe it’s listed at 400,000, bid as needed) at 3% interest will now only cost you $1686/month and the total payments including interest over 30 years will cost $607,109. If prices rise 10% and interest rates rise 1% (all very probable) then the payment is $2100/mo and total 30 year cost of $756,225. Check out the visual below:
Inflation: With rising inflation as time goes by, your cold hard cash is going to be worth less. By one experts analysis, from Feb 2018 to Feb 2021 your $10,635 of cash at 1.9% inflation is now worth $10,000 ($635 less). Now, inflation is 4.2% (doubled) that same $10,000 is going to possibly be worth only $9,142 in 3 years.
Why the 716? Buffalo and our surrounding areas are seeing the impact magnified. CNBC news did a news story not long ago on why and the answer is simple. More remote workers can now choose where to live. Given the choice? They want to be near fresh waters (like our Great Lakes) and away from natural disasters, heat waves and many other reasons. Simply put our 4 season home is a great place to live, work and play. Not to mention, ever look how much houses are in larger metro areas? Go ahead, google what $500,000 will get you in Dallas or New York City.
The Conclusion: I accept the possibility of being wrong (as do all experts) and for many reasons I hope I am as I look to the future. But if we are right? Can you afford that house later on in the new world of 2022 and beyond? I hope so….and 716 Realty Group will be here to help when you are ready at any time to buy or sell real estate. Call us at 716-362-2373.
Keeping Current Matters