Don’t Get Left Behind – by Graham Farran

Let’s Talk Real Estate – April 2022

It seems like everything is more expensive than last year: food, cars, clothes, furniture, and gas which is getting dangerously close to $5 a gallon. But few year-over-year price increases compare to what’s happened to the housing market. The medium price of a home in Jackson County has ballooned by more than $62,000 in the year, going from $343,000 in January of 2021 to the current $405,000. In Jacksonville, the medium price of a home went from $494,000 in January of 2021 to $605,000 by year end, a $111,000 increase.

There are many reasons for this. In the past two years, demand for houses spiked due to a combination of low interest rates and a pandemic, which forced tens of millions of people to work from home. Longtime renters began looking to buy a place with more space, while those who were already homeowners began looking for larger homes or moved to more rural areas away from cities. Many office workers have moved to areas they love and previously would go to recreate, no longer being required to work from an office. Secondary vacation residences have also grown dramatically—mortgage application for second homes climbed 84% between January 2020 and 2021.

To make things worse, the jump in housing demand was met by a nationwide slump in the housing supply. Lags in new housing starts are caused by both a labor shortages and disruptions in the supply chain of crucial building materials like copper and lumber. So, amidst a record demand for housing, we have an all-time shortage of homes for sale, leading to less than a month of inventory in many price ranges.

In addition to rising home costs and low inventory, we are now facing increasing interest rates for home mortgages. Inflation just reached a four-decade high at 7.9% and the Federal Reserve has been firm on raising interest rates multiple times a year to curb inflation. Gone are the days of 3% mortgages, to be replaced by 4%-5% interest rates.

Nothing in the forecast suggests any of the above conditions will be changing anytime soon. In fact, increasing inflation and the current poor performance of the stock market, is causing more investors to diversify into the real estate market, resulting in even greater demand. So, if you are thinking about moving-up, downsizing, or buying your first home, now is the time. Don’t hesitate as both mortgages and home prices are only going to go up!

If you’re renting, know that rents are on the rise after pandemic restrictions subside. As a first-time home buyer, there are so many loans that can help you. Veterans can get a VA loan with “zero” down and buyers of rural homes or homes located in small towns such as Ashland, Phoenix, Gold Hill, Talent, Rogue River, Shady Cove, White City, Eagle Point, and Jacksonville can get a “zero” down USDA loan. Conventional loans are available for as little as 3% down and FHA loans require 3.5% down. Credit scores can be in the low 600’s.

The looming trifecta of increasing demand, low supply, and increasing interest rates will not ease anytime soon, so it will be easy to get left behind if you don’t act soon.