Why the Housing Market Might Explode This Year

  • Home
  • Why the Housing Market Might Explode This Year

It’s March 1st and the stock market just made another all time high. It’s been doing this for 8 straight weeks!

Bitcoin already exceeded it’s all time high in many countries and is approaching it’s all time high in the US as we speak.

The party is back on. Where do you think all of these people are going to spend their new money? Yep, in real estate. But the real estate market hasn’t quite got the message yet.

pic of investors and people cheering the stock market

How Markets Work

You see the stock markets are forward-looking, meaning the market prices reflect what it it thinks will happen in the future – roughly the next 6 months.

In other words, the markets think that the Federal Reserve will lower the Fed funds rate around June, which will lead to lower interest rates, will which will lead to higher asset (stocks, bonds, crypto, home) prices.

But the housing market is always late to the party. It’s the last to react. It gets to the barbecue after all the food is gone, and stays until the lights have already come on 😂

The stock market peaked in December 2021 – The housing market didn’t get the message until June 2022. The stock market is roaring again. But it might take until around June before the housing market skyrockets again.

Smart money either already has, or is currently buying a home, in order to get ahead of the crowd.

picture of seesaw illustrating relationship between interest rates and home prices

Competition will be Fierce

Everyone knows that as interest rates go down, home prices go up. This is because the monthly mortgage payment is lower so people can afford a more expensive home.

This of course assumes that the current imbalance of supply and demand persists. Bad news for many homebuyers, it will. Things aren’t changing anytime soon. We’re about 3 million homes short nationwide.

There will be even more competition for a limited number of homes for even more reasons – changes in the law.

Fannie Mae LawHelping Retail Buyers

As of November 2023, Fannie Mae introduced a loan that allowed people to put as low as 5% down to buy a multifamily property.

That’s right. The word is out about house hacking – how buying a multifamily can be a good deal. It allows you to live in one unit, while renting out the other unit(s), allowing you to save money on your mortgage, while still getting all the benefits of home appreciation.

Well, now theres’ even more competition. The biggest barrier for most people is coming up with the down payment and you no longer need 20% down – 5% will do.

illustration of black people saving money

Bonus DepreciationHelping Investors

People buy real estate not only to make money, but to save money as well – by lowering their taxable income.

In plain english, bonus depreciation basically allows an investor to deduct a large percentage of an asset, such as an investment property, in the first year, instead of having to wait and spread out the depreciation over 27.5 years.

Want to recoup some of those capital gains taxes from all that money you made investing in stocks or crypto? Buy an investment property.

Trump, like him or not, makes his money through real estate. Some say that there is a 50/50 chance of him becoming the next President. Better believe that he will do everything possible to boost his net worth, through inflating real estate prices.

He already said that he will fire Jerome Powell. He will probably then hire someone else who will dramatically lower interest rates even more.

Trump passed the Tax Cuts and Jobs Act when he was President, boosting assets of the wealthy, and the House and Senate are probably on their way to extend it, including bonus depreciation, again.

picture of cooperation between senators to pass laws

Senators are rich, regardless if their Democrat or Republican, and they will always look out for other rich people. In other words, more competition from investors is coming.

To recap, we might soon be in an environment where both everyday retail and investment home buyers will benefit from:

  • Lower interest rates.
  • Lower down payment requirements.
  • Highly favorable tax Incentives.

If (and only if) you’re financially stable and you’ve been wondering whether it’s a good time to buy a home, you may want to get ahead of the crowd. If you’re not ready, relax, keep saving and wait until you’re ready.

We could be wrong, but we may be in for a repeat of 2020-2021 all over again when home prices accelerated rapidly.

Whenever you’re ready, talk to a lender and get pre-approved for a home loan. There are mortgage lenders on our website you can reach out to. Once pre-approved, let us know and we’ll get you connected with a great realtor.

New found wealth from the markets, lower interest rates and a heated presidential election are on the horizon.

Buckle up, we may be in for a wild ride.