Don’t Worry, It’s Not Too Late To Panic!

Lately, my 4-year-old daughter, Eden (adorably pictured below) has taken to running around the house yelling, “Catastrophe, everyone panic!!!” These wonderful outbursts are inspired by precisely………. nothing.

No fire, no invading Viking ship, no zombie attack.

Eden Meeting Her Hero Cinderella

Despite the fact that I think this is hilarious, I did not teach her to do this. I’m guessing she learned this from a TV show or from the more anxious kids at her preschool. Now, while Eden may not have any real reason to panic I think our real estate market is sending off some strong warning signals that I thought I should share with you fine people.

Here are a few interesting charts along with a nice red arrow showing you exactly the point at which you should have panicked. Have no fear though, just because you missed the ideal window for panic does not mean its too late!

Interest Rates (Demand)

This chart shows us the average interest rate for 30-year fixed home mortgages – the good news on this one is you’re only about 6 months behind! We all knew that the 3% interest rates we had fallen in love with could not last forever and we have finally seen the return of 4’s and even 5’s. The rise in interest rates is actually a great sign that the economy has improved and is healthy. However, these higher rates have a real effect on how much house you can buy per $100 a month. This rise in rates is here to stay and VERY likely to continue its climb.

The increase in interest rates has pulled lots of buyers off the bench and we are now seeing a HUGE upswing in demand for homes. We have lots of buyers fighting over homes in an effort to get one while rates are still fantastic as they see their chances of getting an interest rate below 5% slip away.

Active Listings (Supply)

This Chart shows us the supply of actively available homes in the Greater Phoenix area. I included a longer time frame on this one to show you just how dramatic the decrease in the supply of available homes since 2014 has been. Since then, we have seen a THIRTY-SIX PERCENT DECREASE in the number of active listings!

That my friends is a big, big deal. As you can see in the chart above, we see a dip every December in active listings (nobody lists their house at Christmas) followed by a January spike that falls throughout the year. This year’s decrease in supply has been particularly steep, fueled by all of those buyers I just mentioned racing to get a home before interest rates get too high. The ideal time to panic and get off the fence to go buy a home would have been December while all the other festive buyers were hanging Christmas lights on their rental homes.

As any of you who took Econ 101 will guess, this increase in demand and decrease in supply is leading to rapidly increasing prices. You can see in the chart above that this year’s ramp-up has been particularly steep. Ideally you would have panicked back in November while everyone was too busy eating turkey to fight over houses!

The Good News?
It’s not too late!!! I can’t emphasize this enough. If you decide to wait on buying a home you will regret it and can expect to pay more next year. Get in the game while interest rates are crazy good and prices are on the rise due to this fantastic economy. Go get you some!

So the obvious question is, “Are we in a bubble?”

My answer is, “No.”

For a more complete look at my answer to that question, be sure to search the blog for our latest installment of Bubble Watch!

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