The housing market seems to be back on a roll after a slowdown in the summer of 2022 and fall of 2023. So what is going to happen to the housing prices for the remainder of 2023? We are in April already.  So are their home prices going to drop or are they going to go up? Let’s look at it. If you have been talking to realtors or if you have been looking at other YouTube channels or even news or real estate articles, you might have noticed that end of February, March, and April, the housing activity overall and nationwide has gone up. Of course, real estate is hyper-local, there may be variations in your local neighborhood. But overall we have seen two or three things that seem to be pointing. We are seeing a hold-off on potentially a drop in prices.

Here’s what we’ve seen, and this is what my observation is based on talking to a lot of buyers, a lot of sellers, a lot of the Asias nationwide, two or three things we’ve seen. Number one, there are not enough homes for sale, that’s for sure. Nationally, of course, local markets vary. You may be up or down year over year or maybe more right now in April or less, homes for sale in April compared to January. The other thing we’ve noticed is when it comes to open houses, in the summertime of 2022 or fall of 2022, we used to have on average 5 to 8 groups come in, which is still not bad, a pretty good rate of open house visits. But lately, in the last 30 to 60 days we’ve seen 30, 40, 50, and even up to 200 groups for open houses either on a Saturday or both on Saturday. And Sunday there was one open house where they had almost 300 groups in the two days that they had an open house. The other thing we’re noticing is, again nationwide and the market is local, so your market may be different.

The other thing we’ve noticed is that homes are selling faster and there are multiple bids. So what’s happening is homes are selling over the list price. So let’s see why that is happening and that may be an indication of what’s going to happen with the prices. One of the things that’s happening with the buyers, buyers want to buy homes despite the high inflation rate, almost 8%, despite the higher interest rate compared to 2021 and 2022, we are at about 6.7% interest rate these days. The national average, if you look at the last 30, 40 years, the average interest rate is 7.125%. In the 1984s or 1980s, the rates were 15% to 17% in the 90s, they were at 12% and 8%. In the 2000s, we went down to 2.5%. In 2021, we’re back up to 6.75%. So if you look at the average, we are still below the average interest rate. A lot of the buyers still have good jobs. They have down payments, and they want to buy homes.

They are paying a ridiculous amount of rent. That’s what the buyers are thinking. Why should I pay $3,000 to $7,000 a month in rent if I can get to buy a house and then own the equity in there? So there’s a demand for houses. The other thing is people want to move into homes. They want a newer lifestyle. They are tired of renting, they have the down payment and they are qualified to buy. So there’s a demand for housing. And what’s happening is there is a shortage of homes. There’s a big shortage of homes. And that’s one thing that may hold on to the prices. And the best way to explain what’s happening with the home prices or the inventory is let’s look at the chart. I belong to the CRMLS, which is the California Regional Multiple Listing Service. And this chart I’m going to show you in a minute shows the homes available and homes that have sold. And this includes the CRMLS, including all the homes in Orange County, Riverside County, San Bernardino County, San Diego County, parts of all of Los Angeles, and some other bigger counties. So it’s a big snapshot of what’s happening.

Three years ago. If you look at this chart from the CRM going back to January 2020, you can see that there were almost 80,000 or more than 80,000 homes for sale. So if I looked at the homes, on one day in January 2020, there were 80,000 homes for sale in all of CRMLS. If you look at January 2021, it dropped to almost 55,000 homes for sale. That was a big drop just in one year. If you look at January 2022, it further dropped to almost 43,000 homes for sale. So let’s come back to January of 2023, and we are almost in April or March. The chart shows that approximately in March, there were only 30,000 homes for sale in all of CRMLS.So from 80,000 homes for sale in January 2020, we are down to 30,000 homes for sale in the CRMLS. Which means that there’s a big shortage of homes. And at the same time, there’s a big demand for homes. So the question is about supply and demand. As you know, in Economics 101, the more the supply, the less the price.The less the supply, the more the price. And we are in that situation right now.

There’s a big housing demand and there’s a big housing shortage. We have never seen a shortage like this in a long time. In fact, I looked at another chart just a few days ago. Sorry, I don’t have it here. It showed that from 1984 through 2022, we are at the lowest level of homes for sale nationwide. And the chart was similar if in 1994. The chart shows a level of ten of homes for sale. In 2023, it showed nearly at four. So you can see the comparison. So we are at a very, very low point of homes for sale nationwide. And that’s creating a big, big demand. And that’s holding the prices. For now, let’s see if the prices are going to hold. Let’s see if the inventory is going to come up. But I don’t see an increase in inventory coming up. So let’s see why the inventory is so low. And is the inventory of homes for sale going to come up? And is the inventory of homes for sale, not only in the CRMLS listing but nationwide, going to come up? And let’s see the effects of it.

So before we talk about why there is a shortage, let’s talk about the medium sales price of all the homes in the CRMLS. So if you look at January of 2022, when there were almost 80,000 homes for sale, the medium sales price was around $560,000. In January 2021, the medium home sales price rose up almost to $650,000. But remember, the number of homes also dropped in 2021. In 2022, the medium sales price rose to almost $750,000 per home. That’s the medium sales price. And remember, the number of homes for sale had also dropped drastically from 2020. If you come back at the peak somewhere around January or February or March of last spring, the housing prices peaked at almost $830,000. Remember, I mentioned to you that in the summer of 2022 and the fall of 2022, housing activity slows down. And you can see that at the same time, the medium sales price during that period came down to almost just around under $750,000.But here’s the interesting thing. If you look at this chart again, since January of 2023 to almost March of 2023, the medium home sales price went from a low of almost $700,000.It’s coming back up to almost $800,000. So you can see the activity has increased, and that’s because the inventory has gone down. So as the inventory goes down, prices go up. And that’s what this chart was all about. And if you look at the second chart again, this chart shows that the rents in this CRMLS listing has a similar thing.

In January of 2020, the medium rent was around $2,800 a month. If you look at January of 2021, it had gone up to almost $3,000 per month. In January of 2022, it had risen to almost $3,500 a month. At peak around at peak in 2022, rents had gone up on a medium price of 3800 a month. They came down a little bit and they are back up. As of January 2023 and almost March, they’re up to about 3600 a month. So as you can see, as the rents go up, the prices go up. It’s also true that when inflation goes up, home prices go up. So rates are going up, inflations are going up, and they go hand in hand. So when the rents go up, the home prices go up. When the interest rates go up, inflation is going up. So to control all this, the Feds are trying to control inflation. So if inflation comes down, interest rates will come down, and hopefully, that’ll help more sales.

Are the prices going up? Are the prices going down? And also at the end of this video, I’ll have another great video for you to watch it. So keep an eye on it. So going back to the shortage, let’s see why there is a shortage. The number one reason for the shortage is number one, there’s a big demand. So it’s an intrinsic thing you can see visually, but the higher the demand, the more homes we need. But we don’t have any homes. So that’s one shortage. But the real shortage is because the builders who build brand-new homes and a lot of the people who rent homes or have smaller homes want to buy a bigger home. They move to different areas or move to newer homes. Builders have always not been able to keep up with the demand on homes. But in 2021 and 2022, builders thought or looked at the analysis and thought in 2023 and 2024, there’s going to be a shortage of homes or housing will slow down. So they stopped building, and they pulled permits. They put a stop on building more homes. They are building homes, but at a much smaller pace than what they built in 2018, 2019, 2020 and 2021. So the demand was already there for brand-new homes. There was a shortage of brand-new homes. And when they pulled back on building homes, that created another shortage.

The other reason for the shortage of homes is during COVID and including myself, a lot of people during COVID instead of buying more homes or moving out to different homes because they could not see homes, they had nothing to do. They were staying home. They could not see other people, social, family, or friends. They started remodeling the homes on their own. They had all the time. And a lot of people who remodeled homes, including myself, in 2018, and 2019, I remodeled my house. And guess what? I’m not going anywhere because I spent so much money in the house. I love the remodels. The people did a great job, and we’re going to stay here. So in similar fashion or similar circumstances, a lot of people remodel, they can get a higher price, and they’re going to move on, but a big chunk of the people who remodeled or added additions or built an ADU or had an extension done, they are not moving. So that’s creating another shortage because they are not moving.

The other reason there’s a shortage is because especially the tech people are working from home today and a lot of the companies grandfathered into their contracts that they can work two or three days a week remotely or they don’t have to go to work. So even though somebody is living far away from work, they can now not move and don’t have to buy a house or they don’t have to sell a house to move closer to their work. So the remote working has had an impact. Maybe it’s a small impact, but a lot of those people who are satisfied working from home, they don’t have to buy a house closer to their work, they don’t have to drive as much, are staying put. So these are some of the reasons that there’s a shortage of homes. And until these circumstances change and I personally don’t see this changing real estate’s, local market, it may change in your area. So the shortage of homes is here to stay at least for the next one or two years.

In fact, there was a survey done just this year of the top hundred real estate analysts, real estate experts, big companies like CoreLogic, and the combined prediction of homes, according to these 100 people, the survey that was done, 100 analysts and companies, they’re saying that overall, nationally, home prices this year are going to drop around 2%. But in 2024 they’re going to go up anywhere from three to 5%.In 2025 they’re going to go up another two to 3%.In 2026 they’re going to go up another two to 3%, maybe even 4%. So the prediction is homes are not dropping, they may actually go up. And one of the factors that can put a wrench in this whole scenario is what’s going to happen to the banks. We don’t know what’s going to happen to the banking industry. As you know, the Silicon Valley Bank crashed and burned. It’s no longer there. There’s a few other banks like First Republic Bank, and Credit SuisseBank, global banks are having some issues, but the Feds are doing everything they can to save the banks because they don’t want the banks to fail because that may have a big impact on the housing. So that’s the unknown on what’s going to happen with the banks.

But it seems like they’re trying to control it or have it pretty much under control, but we’ll see what’s going to happen. So looks like there is no housing crash coming. Looks like there is no housing drop coming. Based on these factors, based on their real estate activity, based on the demand. The other thing that’s happening is a lot of the buyers are buying. So if you’re considering buying, this is still a good time to buy. So you may say, hey Mike, this is a bad time to buy because the prices are high, inflation is high, and interest rates are high. But I’ve been selling homes for 25 years and there’s one thing for certain, there is no right time to buy. I know a lot of friends and family and clients have chased the market. “Oh, I’ll buy when the prices drop. I’ll buy when the interest rate dropped.” And then when the prices dropped, they could never buy because they probably lost a job, or one of the siblings or one of the spouses lost a job they could not buy, or the business drop, something comes up.

So when is the right time to buy? And I always say the right time to buy iswhen you are ready, willing, and able to buy. Are you ready to buy? Are you mentally ready to move to a new area, to your grandmother, to your parents house, to a beach area, to a mountain area? Are you ready? Then this is the time to buy. If you are able to buy, are you able to buy? Which means, do you have the 3% down or maybe 20% down of the money to put a down payment on a house? And are you qualified to buy a house if you’re paying $4,000 a month’s rent? And if you want to buy a million-dollar home, you can buy and have a $4,000 mortgage, or maybe a $5,000 mortgage, if you include the property tax and all the insurance and everything else. As long as you are qualified to buy, then first you are willing to buy. Now you are ready to buy and are you able to buy? Which means that if you move right now,let’s say this summer, and your kids school is over, are you ready to move? But if your kids are in school, then maybe you are not ready to move.

Are you ready to let go of your current job and move to out of state in Idaho or Montana and ready to move? If not, then you may have to wait. But overall, the right time to buy is when you are ready, willing, and able to buy. Yes, you can buy at a cheaper rate,but yes, there’s a chance you may loseincome and not qualify at that time. But remember, even if you buy in a high price and high-interest rate, overall, if you stay there for a long time, you will always make money, you always profit, you will always build equity in the house, no matter what the price. Because on average, as you may know, in the last 30years, the average home price appreciation is 4% per year. That means if I buy a house today at a million dollars, I’m going to grow that house of a million dollars at 4% per year for the next 30 years.

Where can you get a return like that? You’ll never get a return anywhere like that. And you are staying there and enjoyingyour house and your family and thesecurity and the shelter that you get. So regardless of the price, if you’re ready, willing, and able to buy, go ahead and buy it. Let the home prices do whatever they’re going to do. You have no control over it. Either they’re going to go down or they’re going to go up. They never stay stable, and you can neverpredict when they will go up or down. When 2008 market hit, who predicted that the market isgoing to go down so low, when the prices wereso high in 2021, 2022, nobody predicted that in three or four years, home prices will jump 30% to 50%. So nobody can predict what it’s going to happen. So the best time to buy is whenyou are ready, willing, able to buy. So hopefully this helps.