A few clients have asked how this year's market is shaping up. Well, I'm afraid it doesn't look promising. I expect inventory to be low again (though investors seem to have exited the market), mostly because of the large number of potential sellers who are underwater on their mortgage, due to buying too high or borrowing too much (home equity loans). So that means less supply. Also houses are more expensive this year, not because they have risen in price but because mortgage rates have risen 100 basis points (one percent) since last year and this has increased the monthly payment for the same house by 20 percent. So this too will shrink the pool of potential buyers (in fact, entry-level buyers are at their lowest level in a generation based on mortgage originations).
Like the larger economy, which no amount of quantitative easing will kickstart because wages are too low and debt burdens are too heavy, real estate is in a stalmate because of low demand. This will not change until incomes go up. We can no longer fudge over this with easy debt, as we're tapped out, especially the younger generation, with student loan debt (another debt bubble created by misguided government-backed loan programs that have enriched the banks, sent college costs sky-high, and impoverished a generation), not to speak of low wages, poor career prospects, and high rents.
This has definitely put a damper on the demand side too. So with both supply and demand down, we'll have a very slow real estate season this year. Nicer houses that are reasonably priced will fly off the market, perhaps with multiple bids in Northampton. Indeed, buyers who are determined to get a place of their own will have to be quick on their feet.