In any market, the answer to the question, “is now a good time to buy,” is always the same: It depends. Here is a look at variables weighing on the minds of buyers in today’s market.
- The job/labor market is solid and recovering.
- Inflation appears to have peaked and is starting to decline.
- Interest rate hikes are beginning to wane.
- Recent GDP growth has exceeded expectations.
- The stock market has continued to recover from the lows of September/October 2022.
- Interest rates are higher than they’ve been in decades. Many are now unable to afford higher monthly payments.
- Job cuts in certain sectors of the economy is causing uncertainty.
- War and tension on the Eurasian continent is causing uncertainty.
- The perceived threat of a global recession is causing uncertainty.
There are also longer-term fundamentals to consider.
First, organic demand still appears to be strong as many buyers are simply waiting on the sidelines for better prices. Typical reasons for organic demand include:
- Current home that’s no longer sufficient for one’s current needs.
- “It’s time.” First-time buyers taking the step to home ownership as cornerstone of investment strategy.
- Mandatory “back-to-office” initiatives.
- Untenable commutes after moving away from COVID epicenters.
- Lifestyle requirements given one’s age, background and personal tastes.
Second, while appreciation is a consideration, people tend to buy homes to live in. Most people do not sell quickly unless they bought the house intentionally to flip or are in financial distress.
Third, our market’s current downturn is not like the 2008 housing market crash in that the quality of home buyers is higher now. The mortgage qualification process is stricter now than it was then due to lower debt-to-income ratio, additional income and asset verification requirements.
Fourth, it’s likely that there will be increased competition for quality housing in the long-term. Available inventory remains low, and new construction permits have been trending down for the past year or so. While NYC is working on changes to existing zoning laws to accommodate office-to-residential conversions, it takes years for new housing to come “online.”
Fifth, unlike other developed nations, the portion of the population at their peak spending years (25 to 65 years old) will be increasing in the United States for the next two decades or so. There will also be an increase in housing demand for the largest generation — the Millennials, who are now in the prime years of their life looking to buy their first home.
Sixth, there’s “no more land” to build on at favorable prices in quality areas.
Seventh, many foreign/international buyers still consider the United States — in particular, New York City — a desirable place to invest or “park” their money due to the stability of our market. Moreover, foreign buyers are usually all-cash buyers, which intensifies the competition and pricing for limited quality housing.