Where Will the Housing Craze End? Predictions From a Real Estate Whisperer
Ever hear of a guy named Bill McBride? He’s a retired Southern California technology executive who is famous for predicting the housing crash of 2007. His economics blog, “Calculated Risk,” has been accurately predicting economic events since the early 2000s. These days, he’s chiming in on the current absurdity we call the housing market. McBride recently told The Atlantic, “I’ve never seen anything quite like this. It’s a perfect storm.”
Buyers are notoriously bidding on homes sight unseen, sometimes paying hundreds of thousands over asking price. The CEO of real estate platform Redfin reported that a buyer in Maryland offered to name her first-born after the seller — that’s just how crazy things have gotten.
However, McBride saw the mayhem coming long ago. And when you think about it, it was fairly predictable. The Millennial generation, born in the ‘80s and ‘90s and now the largest American generation, were destined to come of age and demand housing about now. And since the Great Recession slowed construction, it was inevitable that there would be a housing shortage. Of course, this widespread problem was further compounded by a pause in construction early in the pandemic, followed by soaring lumber prices and clogged supply chains that as yet render many materials unobtainable.
But most of us want the master to gaze into his crystal ball and tell us exactly what is going to happen next week or next month. It turns out, McBride’s formula is more scientific than alchemical. He says that it’s much easier to measure available housing inventory than demand, so if you want to know what’s going to happen next, you need to look at inventory statistics. Recent trends do reveal that inventory is increasing. Real estate research firm Altos Research reported that more homeowners are reducing their prices to sell. And housing starts are at their highest levels since pre-Great Recession.
In the end, McBride’s advice is pretty sensible. When asked if buyers should be willing to keep raising their offers and buy now in case prices get even higher, he said, “… if you’re in a market where you consistently have to spend significantly above listing, I wouldn’t buy right now. I think when you put everything together, the odds are that things get more normal in a year.”
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