A Gen-Z's Guide to Life and Real Estate

“Hey Max, how is the market?”

Great question…

What are you planning on doing? Buying? Selling? Investing? I have a different answer for each. Today, let’s talk about buying.

The more people you ask, the more differing viewpoints you will receive. At the start, I will tell you what just about anyone will: inventory is low. For those familiar with the law of supply and demand, when supply is low, the demand will be stronger, and thus, the price will be driven up. I want to share a graph with you; this comes from the Wisconsin Builders Association depicting new home starts from 2006-2021. Now, you might say that the last time we were pumping out 17,402 homes per year, we were in a bubble, and it wasn’t sustainable. Fact. However, these days, Fannie May and Freddie Mac have tightened mortgage restrictions and are more closely regulating people’s purchasing power to something that is actually sustainable based on their income, debt, and other things (ask a lender) to prevent that from happening again. The problem? The dip in new starts is being felt today…

“Well, I have been seeing prices rise like crazy. Are we in a bubble?” We find it almost impossible to say we are in another bubble. When you factor in that homes have been changing hands at a pretty sustainable rate since the Great Recession and a population change of nearly 30,000 people in the past 13 years, you begin to see why the new start pace from 2008-2021 is not making the situation in the present day much easier. You should also factor in that when Covid was in full swing, interest rates dipped to the high 2% range, money was practically free… Now we are up in the 7% range, and if you bought with a 2.725% rate, why would you want to get out? Your mortgage payment might be double what it was! The majority of people that we see selling their homes are experiencing life changes such as new jobs, new family members, or maybe it is time to downsize. We are only beginning to see 7% become more normal in the minds of sellers who are in the process of finding a new place at the time they are selling.

Okay, I am done rambling about stats and observations that are honestly a little scary. Now it’s time to get into my opinion on whether or not now is a good time to buy.

You might have heard the old Chinese proverb, “The best time to plant a tree was 20 years ago. The second best time is now.” There is also an ages-old real estate version that replaces the tree with buying a home, but do you get what I am hinting at? Yes, there is a lot of gloom and doom out there, as I mentioned in one of my recent blogs, but honestly, it isn’t that bad of a time to buy a home. Sure, you might be turned off by the rates, but assuming the market continues to appreciate at a similar pace, you might be paying more per month even if the rates do drop in the near future. Bring up a mortgage calculator, put in a loan amount of $300,000 over 30 years at 7.5%, and then change the numbers to $375,000 at 6%. It ends up being $2,098 for the former and $2,250 for the ladder. Date the rate, marry the house. If owning a home is something that you dream of doing, don’t abandon that dream. Find one activity you can do every day that puts you in a better position for the future, skip the Starbucks, watch a YouTube video on different housing markets, read a book on homeownership, whatever it looks like to you. When there is a will, there is a way…