By Mike Bodeen · 4 March 2024
Two years ago, we were in a rabid seller’s market. Home prices had gone through the roof and were at a monthly median sales price of $433,500. That was up from $339,000 in February of 2021 and up from $290,000 in 2020 – a 49% rise in two years.
Prices peaked in May of 2022 at $475,000. Hugely high prices, coupled with increasing mortgage rates began to slow the market. By the end of 2022 prices had dropped to $412,000. Most all “experts” called for continuing price drops as clearly, the market had become unsustainable. The question now was not whether the market would drop, but by how much. Many “eminent” economic prognosticators publicly stated that the Phoenix Metro market was heading for the big crash. After all, mortgage rates were in the 7% range compared to 3% in the not-too-distant past, and prices had not yet fallen to a palatable range for most buyers.
Then, starting one year ago, prices did what? They began to rise! And this made no sense. Buyers were in short supply, but sellers were in shorter supply. Most homeowners either owned their home outright or had a mortgage rate of less than 4%. Homeowners were saying, “Why should I sell? Mortgage rates and home prices are both too high?!
Most sellers can hang out. They’ve got a cheap mortgage. Buyers are the ones suffering here. Is there a reasonable way for buyers to buy affordably and some way to entice sellers to put their homes on the market, and increase the housing supply for buyers?
“…one thought I’ve had is to allow homeowners to transfer their current mortgage (and existing rate) to the next home they buy for say, their existing rate plus ½ or 1 percent.”
Maybe not, but one thought I’ve had is to allow homeowners to transfer their current mortgage (and existing rate) to the next home they buy for say, their existing rate plus ½ or 1 percent. Millions of homeowners might jump on that like a starved dog on a bone. The pent-up-demand for sellers wanting to move is no doubt huge. The increased supply of homes on the market could temporarily keep prices level, or even lower them – a benefit for buyers.
Existing lenders would immediately benefit from the increased rate. Is the bureaucratic entanglement of doing this huge? A definite understatement.
But the local alternatives aren’t pretty either. Decreased zoning regs may not be so welcome. Legislation (read: government) wants to let your neighbors build another living unit on their property and/or to allow more parking in your neighborhood. That’s just for starters.
What are your thoughts? Cures?