When you're hot, you're hot. When you're not, you're not. Usually, you're somewhere in between, and in real estate investing, the trick is knowing which way you're heading.
A good example is the residential housing market. Record-low interest rates, soaring demand, and scant supply have combined to produce record-high prices across the country. But will it stay that way? And if so, for how long?
Indicators of a slight cooling are beginning to pop up. That includes a couple of reports out this week.
In their August forecast, the economists at this government-sponsored enterprise (GSE) lowered their home sales forecast for the second half of 2021 -- from the anticipated 3.8% over 2020 for the year they predicted last month to 3.1%.
Same with new construction. The Fannie Mae economists now forecast housing starts to be 16.9% higher this year than last, down from the 17.7% they had been projecting. An uptick in expected multifamily builds is offsetting a slight dip in expected single-family starts.
The listing service said this week that the average share of homes with price drops each week has passed 5% for the first time since the four-week period ending Oct. 10, 2019. This is during not only a time of year when that metric is usually flat but also a time in our lives when housing prices continue their meteoric rise. Just slightly less meteoric.
The Millionacres bottom line
While your financial strategies, hopefully, are more measured than the crap shooters' techniques in the Jerry Reed classic song linked above, there certainly is no sure thing here. There's not even agreement among the prognosticators.
For instance, the National Association of Home Builders just released its quarterly multifamily construction report, and it says builder sentiment is flagging because of supply and permitting issues and the eviction moratorium that is making it more difficult to obtain financing in some places.
Redfin's chief economist Daryl Fairweather summed it up nicely in their report:
"As we approach the beginning of back-to-school season, home prices typically cool, supply winds down, and homes take longer to sell. All that's happening, just very slowly. I don't think the housing market will return to a fully typical state anytime soon, but we are starting to trend in that direction."