Hidden Factor That Ensures House Prices Do NOT Go Down

In recent times, the real estate market has been a topic of much speculation and concern. The surge in home prices combined with rising interest rates has led many to anticipate a looming crash, drawing parallels to the bursting of a bubble. However, amidst these apprehensions, there’s a crucial aspect that often gets overlooked—the untold stories of those who have been tirelessly trying to enter the housing market, only to be repeatedly thwarted. In this blog post, we delve into the overlooked factor that might just reshape the narrative surrounding real estate prices and interest rates.

The Invisible Struggle: For the past two-plus years, prospective homebuyers have faced numerous challenges. An increasing number of individuals have been shut out of the housing market, with an article from MSNBC even highlighting the dwindling hope of renters in the U.S. to ever own a home. The demoralizing experience of attempting to purchase a house has left many disheartened.

The Dallas Dilemma: To illustrate this point, let’s consider a specific case from Dallas. Despite putting in seven bids, each exceeding the asking price, this individual faced constant rejection. The housing market became so competitive that offers were made without even viewing the property. The outcome? A bid of sixty thousand dollars over the asking price for a house built in the seventies. What happened to the numerous other people who faced similar rejections and disappointments?

The Unseen Demand: The key factor everyone seems to forget is that these individuals, who tirelessly attempted to buy a home in 2020 and 2021, are still out there. The crowds of people who made multiple offers, only to be outbid or face cash offers, are still lurking. Despite the challenges, they remain hopeful, and this untapped demand is about to come into play in the coming months.

Anticipating Change in 2022: As we move forward into the balance of 2022, there is a prediction of increased inventory entering the market. However, this influx won’t lead to a crash as many anticipate. Instead, this inventory will be swiftly absorbed by the multitude of individuals who, for the past two years, have been non-buyers due to the intense competition and limited supply.

The Reality of Demand: Contrary to common belief, most of these potential buyers weren’t rejected because they couldn’t afford a mortgage or lacked pre-approval. They failed due to the sheer intensity of the competition. If a house that went for sixty thousand over the asking price a year ago reappears on the market with a similar markup, those same individuals are likely to snatch it up.

Renters and the Market Dynamics: The argument that higher interest rates will dampen the housing market doesn’t hold water when considering the rental market. Renters are already facing increased rental rates, regardless of interest rates. Landlords, aiming to cover market demands, have raised rents substantially, adding further pressure on potential buyers to make a swift exit from renting.

The Financial Equation: For those transitioning from renting to homeownership, the increase in mortgage payments due to higher interest rates may seem daunting. However, this rise might be negligible compared to the significant spikes in rental rates observed in recent years. The demand for homeownership remains high, with potential buyers ready to pay above market prices.

The narrative surrounding real estate prices and interest rates often overlooks the resilience and persistence of those aspiring to become homeowners. The demand is still robust, and the influx of inventory in the coming months is likely to be absorbed by these eager buyers, rather than causing a market crash. As we navigate through the remainder of 2022, it’s crucial to recognize that the real estate market’s dynamics are multifaceted, and understanding the untold stories of hopeful buyers is essential for a comprehensive perspective.

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