Don’t believe the Chicken Littles in the media

I love YouTubers. Always a good laugh. Always predicting the market is going to crash.

They get a little nugget of data, like that the number of people refinancing their mortgages has dropped and draw the craziest conclusions. Well, when rates were between 2 and 3%, everybody rushed out to refi. Even if the rates had not gone up, eventually everybody who would have refinanced would have done so. That statistic was bound to decrease on it’s own eventually.

My favorite ones are those that predict a major housing crisis. It is just not going to happen, especially in Lexington.

Why?

The number one reason is that Lexington is almost out of land. Lexington cannot grow any more. The surrounding communities will of course grow. Lexington will always be the most desirable town in the Bluegrass and prices will remain higher than anywhere else around us due to that. (FYI-we will see a whole lot more remodeling in the future than we see building in Lexington.)

What else do I see in the near future? A slowing market, mainly due to interest rates and nothing being for sale. Right now everybody is complaining that 5% interest rates are the worst thing to happen to the market. I disagree. While rates being low were nice, it is the low rates that spoiled all of us and are affecting the market right now. We currently act like rates in the 2-3% range were normal and 5% seems excessively high. However, I don’t see prices dropping though. That’s because all those sellers who refinanced their mortgages when rates were under 3% are not going to move until they have a need. We need sellers in the market. When sellers are scarce, that means more demand than supply. People will likely only move when they outgrow their home, lose a job, get transferred, their family grows, Grandma needs to move in, or a divorce. You’re not going to give up a 3% mortgage on a cheaper house to get a 5% mortgage on a more expensive house unless you really need to move.

So, in Lexington at least, we have little room to build more houses, sellers who are less likely to move just because they want a nicer home, and higher interest rates. All of which means less supply at a time when we have Gen Z trying to get their first home and millenials needing to move up.

I guess if I had a YouTube channel, it would be pretty boring because you don’t get much attention by saying prices will remain at least stable and the market will stay slightly tipped in the seller’s favor.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s