Roaring Fork Valley monthly stats - Summer is here, but we are entering hibernation

Hi,

Today the Federal Reserve, after sky-high inflation readings last week, decided on a 0.75% rate hike. If the last 2 years of real estate frenzie was in part powered by low interest rates, one would think that higher interest rates would lower real estate prices, but it might be playing out differently this time...

We know now that the 2008 crash was created by permissive lending rules that made it too easy to borrow money to buy real estate. It increased competition on the buyer's side since most people were "qualified" to buy homes, and pushed prices up to unsustainable levels. The debt holders (buyers) did not have the financial ability to weather a downturn. When things got slower, too many real estate owners wanted to sell at once, and the market crashed.

This time around, the Federal Reserve has learned their lesson, and supported the real estate market by lowering interest rates, but are tightening the lending standards at the same time. This way the individuals who purchased homes were solid enough financially to hold onto their properties in a slower economic environment. With slower economic times ahead, we are about to see if this was accomplished. By my experience and looking at the stats out there, it seems like it was.

In the meantime, they might have created a monster. Buyers are so solid that they will never have to, or want to sell. Debt financed at interest so low, you wouldn't want to let it go. A real estate market that stays low in inventory for the long run because of the general wealth of its owners. Offer and demand are what make up the price. With only a few houses on the market, there is always a handful of buyers to scoop them up despite the high price.

By implementing a policy that only allowed wealthy buyers to access property, the Fed has set the pace of the real estate market at its slowest. If inventory doesn't pick up, prices will be high and sales volume will stay low for the foreseeable future.

In short, Winter is probably not coming, but hibernation might be around the corner...