The real estate market has been tough for buyers the past few years. After the economic fallout from Covid lockdowns began, many people decided to sell their houses and move to another place. This caused huge disruptions in the market that we are still seeing today.
A common question I’ve seen is when the market will crash. The sentiment seems to be that real estate is overpriced, and that it’s only a matter of time before the market has a major correction downward.
I asked a local Tennessee Realtor, Megan Dietsch, about the real estate market and what its future looks like. She provided some perspective on the market and what prospective buyers can do to successfully navigate it.
When is the real estate market going to crash?
The real estate market is not expected to crash any time in the near future. Throughout the country, the market is very strong and continues to remain strong month after month.
Unlike 2008, when there was a housing surplus, we are dealing with a housing shortage. The market won’t crash down when the supply of housing is less than the demand.
We are seeing an increase in inventory throughout Middle Tennessee, as well as an increase in demand despite higher interest rates. Though the supply is not as low as it was a couple of years ago, there is still a shortage and that pushes prices upwards.
Why has the real estate market gotten so crazy in the past few years?
Several factors have contributed to the housing market’s recent volatility. Low mortgage rates, limited housing supply, and increased demand from buyers seeking larger homes due to remote work were key drivers during the pandemic.
Currently in Middle Tennessee, we are seeing an influx of individuals and families relocating to the area. Rutherford County is the fastest growing county in the whole state. This has significantly affected our real estate market in regards to supply and demand.
Home builders are unable to construct homes fast enough to meet the higher demand. Additionally, current homeowners often obtained very low interest rates a couple of years ago. They are understandably reluctant to sell their homes now because they may have a much higher interest rate on another home.
How have interest rate hikes affected the real estate market?
Low interest rates typically lead to lower borrowing costs for home buyers. This often increases affordability and increases demand for real estate.
On the other hand, interest rate hikes typically lead to much higher borrowing costs. Monthly payments on a mortgage are much higher with rates around 6% as opposed to 3%. This higher overall cost reduces affordability and demand.
Once the initial shock of a rate hike subsides, we typically see demand slowly increase over time. We’re starting to see this now, as buyers trickle back into the market, recognizing that it is unlikely we will have 2-3% rates again any time soon.
How long is it typically taking to buy a house right now?
In the current real estate market, the time it takes to buy a home can vary widely depending on factors like location, market conditions, and individual circumstances.
Buyers have a number of things to accomplish: Finding the right property, negotiating a deal, securing financing, and completing the closing process. This all takes a lot of time.
On average, the process can take about 30 days once the house is under contract.
What are your most important tips for first-time home buyers right now?
For first-time home buyers, it’s crucial to start by understanding your budget and having pre-approval for a mortgage before you start searching.
Start researching neighborhoods early as well. Determine what areas you are open to buying in.
Having a reliable real estate agent will also help you find the right house for your needs. Your agent will know the market and region and can advocate for you to sellers.
It is also a very good idea to do an inspection as part of the process. Waiving an inspection just to get under contract can have serious consequences later on if there is a problem that a inspection would have revealed.
Finally, be prepared for the costs that come with the home-buying process. This includes closing costs, down payment costs, appraisal fees, and home inspection fees.
Homeownership also has its own expenses, like homeowner’s insurance, property taxes, and maintenance.
Final Thoughts on Navigating the Real Estate Market
I hope you find Megan’s insights helpful. This housing market is tough to navigate for buyers, especially first-time buyers. But it’s not a hopeless situation.
Buying a house requires patience. Rushing into homeownership can lead to a situation where the house is a burden and not a blessing.
In my view, it’s better to wait a little while and get ourselves into a position where we’re truly ready to buy a house. It’s not what our culture tells us to do, but being counter-cultural and taking the path less-followed often leads to better decisions.
If you need a real estate agent in the Middle Tennessee region, you can reach out to Megan Dietsch at SimpliHOM.
