What It’s Like to Buy a Home in 2017, from a Realtor (and a Recent Home Buyer)
As a realtor, I can tell you that the housing market is incredibly hot right now. There are just far fewer homes than there are buyers, and a shortage of an in-demand commodity makes any market a seller’s market. This housing boom is, as we discussed in an earlier post, a result of the simple law of supply and demand.
That’s my perspective as a realtor.
This week I was on the other side of a house sale. My wife and I just purchased a new home, and we were one of five offers—which meant we had to pay above the list price, like almost every other home buyer in this market. This is the home our kids will grow up in, so it was worth it.
The current market is great for sellers, and it’s great for realtors. Having started Worth Clark Realty in 2012, I can tell you that the current market is far more preferable to the one that existed 5 or 10 years ago.
However, residential real estate seems to have swung wildly between two extremes in the past decade. Beginning in 2007, there was far too much housing supply—in large part because there was far too much easy credit in the years before the crash. Almost anyone could buy a home. Then, suddenly, no one could borrow and very few people could buy a new home. Eventually the excess housing that went unsold was bought by institutional investors, cash buyers, and people who could still manage to meet the stricter borrowing requirements that went into place after the Great Recession.
But once that excess housing was gone, buyers became faced with a new housing problem: too few homes.
Clearly, something is broken.
Residential real estate is impacted by government policy. From the Federal Reserve’s role in setting interest rates to the existence of guaranteed loans, the federal government is deeply involved in the housing market. In fact, it’s not a stretch to say that the modern idea of home ownership is a direct creation of federal government policy, beginning in the 1930s with the creation of the Federal Housing Administration (FHA). Before 1934, mortgages were often far shorter and far more tilted in the lender’s favor.
Without the government’s role in the housing market, it’s safe to say America would have far fewer homeowners.
However, there is a fundamental flaw to the way the government intervenes in the housing market. Rather than taking a holistic, forward-looking view of what home ownership should look like—particularly in a society where more people are looking at options other than ownership—it instead consistently seeks to prevent yesterday’s crisis from happening tomorrow. That isn’t in and of itself a bad thing. It’s important to look at mistakes and do what you can to make sure they don’t happen again. That said, correcting yesterday’s mistakes won’t ensure that people who want to purchase a home and have the income and credit score to do so can become homeowners.
When I bought our new home this week, four other potential buyers were left to search for another property—and there is no guarantee they’ll be any more successful in their next go around.
I am very much a free-market guy. Personally, I strongly dislike almost anything associated with politics. However, it is obvious that the government plays an important role in the health of the housing market, which in turn plays an important role in the health of the entire economy. Since that’s the case, policymakers need to take a more strategic view of housing and the role of home ownership in our economy. Ten years ago, the housing market imploded, in part because too many unworthy borrowers got home loans. Today the opposite is true. Worthy buyers can’t find a home because of an inventory shortage that won’t let up soon.
We are a nation that put a man on the room. We’ve created the most advanced and powerful economy in the history of the world. We clearly have the capability of regulating the housing market in a more thoughtful way. We can do better than careening between far too many and far too few homes in a relatively short period of time.
How do we do that?
We begin by looking forward, rather than backward, and creating housing-related policies that are focused on tomorrow’s solutions—rather than yesterday’s problems.
President & CEO
Worth Clark Realty