Welcome to 2021. I've found my first rumor of impending doom.
As Christopher Hitchens once wrote, “that which can be presented without evidence can be dismissed without evidence.” However, faithful readers, I would not do that to you. I am here to help you, with evidence, help you understand and counter claims made by the uneducated and fearful.
In his TARR Report for November 2020, author Stacey Anfidsen found that month end inventory for November 2020 had decreased by a staggering 51% from November 2019.
My mother-in-law’s neighbor hired a contractor to work on their house to get it ready for sale. When my partner went by to pull her trash cans in this morning, the contractor stopped him for a quick chat. Turns out an attorney this contractor works for has started sounding the alarm bells about an impending real estate market crash in 2021. After asking a couple pointed questions, my partner learned that this attorney is ringing the alarm because he’s been listening to others who say there just has to be a market crash at some point, right? Prices keep going up and everyone wants to buy.
This person is correct that everyone (in the hyperbolic sense) wants to buy right now. Just look at any of the articles I wrote earlier in 2020 to understand the factors driving those who are capable into the suburban home search. I will still stand by all conclusions made in those articles. There is no hotter commodity right now than housing that allows you to remain distanced from those outside your “quaran-team,” have the space and privacy to host multiple school and work video calls, and entertain both yourselves and others in a safe way.
Let’s put it all together. If this attorney and his friends think the housing market is going to crash, where is the evidence to support his conclusions? If we look at the conditions required to produce a crash, the data is not in his favor.
For a crash, supply needs to outpace demand. We need to have more houses on the market than we know what to do with. Anyone who has tried to buy a house in the last 10 months can tell you we are far from that point. For one of my half-dozen buyer clients, I’ve written 4 different offers at a minimum of 110% of asking price, with all other terms exactly what the sellers wanted, and I’ll probably write 4 more before we manage to get one accepted. There are too many cash buyers snatching up all the inventory - cash being a preferred financing method to sellers as there is no persnickety lender to pull the rug out at the last minute.
Not only do we have personal experiences of area agents to draw conclusions from, but we also have data. The aforementioned Stacey Anfidsen’s TARR reports are very informative. Two important metrics are month-end inventory and number of homes listed during the month. We will look at both of these going back to June 2020 (October unavailable).
That’s a lot of down arrows. Even in months when inventory increased a bit, like July and September, the month-end inventory still trended downwards. A continuous decrease in inventory tells us that there are still more people buying homes than selling them. If we were headed for a crash soon, the arrows would be pointing the opposite direction.
With more people wanting to buy homes than are available, I feel pretty confident saying that we are not yet looking at a market crash for Raleigh-Durham. This can certainly change in the next couple months, but what’s going to happen that would allow such a difference? Interest rates are going to remain low as the American economy continues to struggle against the impacts of COVID-19. The virus isn’t going away and, despite the availability of a vaccine that not everyone will take, there are variants popping up around the world. Only a matter of time before these variants get to the U.S. and we go back into some kind of lockdown like the U.K.
As glad as I am that this attorney has friends he trusts, I would caution him, and you, to look for corroborating data before spreading potentially unsupported information. More of y’all will need to have me sell your homes before we start worrying about a crash. I’m very happy about that, and I hope you are too.
Happy New Year!
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Jessica Mohr is a licensed real estate broker working in her hometown of Raleigh, North Carolina.