Written by Leah Curtis 09 22 2021
Housing expert Ivy Zelman, founder of Zelman & Associates, talks rising home prices, the lingering cost of lumber, interest rates and more during the opening general session of the 2021 RE/MAX BOC.
Can anyone guess where the market is headed, or whether historically low interest rates will dip even lower? The short answer is no.
But experts who analyze data with time-backed industry knowledge often have a sound idea.
Ivy Zelman, CEO of Zelman & Associates and renowned real estate analyst, joined RE/MAX, LLC President Nick Bailey during the opening general session of the 2021RE/MAX Broker Owner Conference (BOC) to discuss the near future of the U.S. housing market. With her expertise, Zelman shares her honest opinions while answering burning questions.
Are prices on existing properties and new home construction lowering?
“I’d say home prices are running too hot right now,” Zelman said. “We’ve seen tremendous appreciation and right now, even though theoretically it’s still deemed to be nationally affordable, I think what we’re seeing is a level of appreciation that is not only not sustainable, but we are starting to see the consumer pushing back.”
According to Zelman, the best way to combat inflation is for the consumer to simply say “no” – and that trend has already started. For the first time in months, homes in less-than-ideal condition aren’t flying off the shelves like hotcakes, and instead are starting to spend more days on market. Price reductions – as well as factors like contingencies and inspections – are starting to make a resurgence on more worn homes as well.
The new-home construction industry is facing a similar reality.
“We’re seeing more inventory from the new-home market that’s not selling at the same pace, but is still very strong,” she said. Zelman added that the cost of building materials – including lumber– is seeing as much as a 40% increase since this time last year.
“What we saw for a while was the builders were limiting sales, capping sales and raising prices because they couldn’t keep up with demand. And basically, their backlogs are getting very extended,” she explained. “Now, we’re seeing a lot of those caps getting removed, so volumes are picking up, but they’re not able to pass the price increases off as significantly as they have been.”
“I think we’re going to wind up seeing markets get overbuilt. We’ll see incentives and we’ll see home prices correct in those pockets – markets where you see heavy loads of new single-family homes for sale.”
Are mortgage rates dropping or rising?
When it comes to interest rates dipping below their already historic lows, Zelman believes it’s a matter of when – not if.
“If interest rates dropped, I think the party would rock on,” she said.
On the other hand, if rates were to go up, which she says no one is expecting currently, “that would completely stop the music and the party would end, even at a rate as low as 4%,” she said.
A raise in interest rates, which currently lie just below 3%, she believes, would disinsectivize the majority of families – especially those locked in at low rates or first-time buyers – from moving. She thinks any movement in percentage at the moment would go lower, not higher. “When rates go up, it hurts affordability and it hurts mobility,” Zelman said.
How will the current moratoriums and mortgage forbearance affect the market?
“If the eviction moratorium is actually expanded, it just means evictions will obviously no longer hurt the market,” Zelman said. “You’re not going to have empty units and, therefore, upward pricing pressure will continue on rents.”
“That eviction moratorium will just keep that inflation [of rent] rapid and surging, as opposed to the empty units that would otherwise need to be occupied.”
And if the forbearance is expanded, she added, less units will have to be sold.
“At some point, even if [homeowners] have equity, they’re going to need to sell,”Zelman said.
Source: RE/MAX Newsroom