History doesn’t necessarily repeat, but it does rhyme…

My theory:

For insight on the current real estate market our best historical comparison is the 1970s.

In the 1970s we saw excessive money printing which resulted in excessive double digit yearly inflation as well as years of double digit home price growth… sound familiar? (20’-22’)

We saw soaring real estate values that mirrored the excessive inflation due to excessively low rates in the early 1970s.

The FED saw what their experiment had created and dropped the hammer.

In the years that followed, the Fed tried to aggressively tamp down double digit inflation by excessively jacking interest rates.

The swings were actually worse and more dramatic than the last 2 years with more extremes (9% swing).

In the 1970s, when interest rates were at their peak and demand and transaction volume at its lowest: home sales were flat but never dropped in price (0-1% growth).

In my opinion, what we saw transpire over a few years in the early 80s, we will likely see from today through 2027.

As interest rates headed South and inflation moderated into the mid 80s we saw another price boom due to pent up demand and increased affordability due to interest rates trending down.

There was one other tailwind that no one talks about that led the surge through the late 80’s: The largest generation ever created, The Baby Boomers in their peak homebuying years.

Today, we have a similar economic scenario and we now have the largest generation ever created (Millennials/Echo Boomers) that stand on the precipice of their prime home buying years. BTW, they are larger than the boomers.

The pent up demand is unreal. Where are the buyers you ask? There are plenty that want to buy.. it's just simply unachievable for most due to affordability at the moment.

Each time mortgage rates drop another half point, we will see thousands of new millennial buyers across the USA find mortgage rates stomachable and compete.

We will see only some current homeowners with equity find rates stomachable enough to discard their lower rates, list their current homes, and trade up. Inventory will remain scarce as a result.

2023 likely looks like 1983 with 0-1% price growth.

2025 likely looks like 1987 with almost 10% home price growth in an environment of pent up demand and low rates.

Over the past year I have watched buyers retreat in disgust as they watched their hypothetical payment balloon, taking them out of the game.

My fear is I will see the same disgust from the same buyers as they see prices rise dramatically. Just as interest rates become stomachable, they return to the market and find they were rug-pulled once again with home values $40k higher.

Those that believed in a residential 2008 style bubble/crash will watch in awe on the sidelines wondering what the hell happened.

Stay tuned for my bold predictions in the new year on where I think interest rates and home prices are heading.

I take the time to write about what I am seeing in the Columbus real estate market every few weeks. This is NOT a templated marketing newsletter…it offers tips/tricks and observations you won’t see in your news feed.

https://www.parsonsrealestategroup.com/newsletter