Buying and Selling in the Post-Pandemic Market

“I don’t see much evidence of an equity bubble” – Ben Bernanke, 2013

With COVID-19 in the rearview mirror (hopefully!) and restrictions lifting, we

should see a dramatic change in the real estate market – right?

After all, we are in a real estate market ‘bubble’ from the pandemic and it’s

about to burst – right?

Sellers can ask any price for their homes right now and buyers should wait for

the ‘market correction’ that is surely just around the corner – right?

I hear this from many sources: potential buyers and sellers, media ‘experts’,

pundits within the industry; but looking at the current market from a ground-

level view, I’m not convinced. Stick with me, I’m going somewhere…

Is this a bubble? Depends on your definition I suppose, but I don’t think so (not

like 2006, anyway) and here’s why: 

First, the 2006 “bubble” and the ultimate crash a few years later when the

Feds raised the interest rates had causes within the investment and banking

industries that have (mostly) been corrected. 

Second, although people are leveraging the historically low interest rates to

increase their buying power to frightening levels, with fixed rates the norm

and the subprime market under control, and interest rates rise we will see the

double-digit price increases slow down, but few will be defaulting on their

variable interest loans. In fact, with the slight increases by the Feds, mortgage

rates may stay low for a while longer, as lenders' margins compress and

competition increases.

And speaking of competition, that’s exactly what’s driving real estate prices.

Supply can’t keep up with demand – period. There are many reasons for this,

but it doesn’t appear that there is anything on the horizon that will quickly or

dramatically change the situation. A little shifting here and there – like urban

renters and their city-center employers figuring out that living and working

from the ‘Burbs might be the new standard, or the outrageous material and

labor costs for builders easing enough for more supply to be built – but with

the incredible amount of mortgage refinancing that has taken place over the

last few years, homeowners don’t seem to be in a hurry to move!

So what’s a buyer or seller to do? Recognize the market for what it really is.

Here’s what I mean:

If you’re a potential seller, now is the time to list your house - with the help

and advice of an experienced agent! The market is hot, but it is equally savvy.

Slightly underprice your house and you’ll be spoiled for choices of offers, likely

far exceeding what you reasonably hoped for. Slightly overprice your house

and even this market won’t forgive you! Competition drives prices. Remember,

though, that your ‘profit’ will really just be an equity swap into the house, or

school system, or location you’ve always wanted.

If you’re a potential buyer, take an honest look at what you can truly afford

with the help of a seasoned mortgage lender (now is REALLY NOT the time to

go it alone on-line!). Accept that your ideal home may still be a bit out of reach,

but if you don’t jump into homeownership now, you won’t be able to take

advantage of the rise in equity and the relatively rapid mortgage paydown.

Between increasing prices and the promise of inflation, the average buyer can’t

save money fast enough to make any difference in a year or two (but you will be

paying down your landlord’s mortgage – and for that, he thanks you!)

The good news is the economy and the real estate market appear to be robust

despite the pandemic, and if both buyer and seller are willing, they should each

be able to leverage this market to their individual advantage.