When is the housing market going to crash? That seems to be the most asked question right now on google.com according to a CNBC news article posted on April 13, 2021. This is a great topic to address here in Las Vegas as we struggle with a housing inventory that is the lowest I have ever seen in my 17 years as a full time Realtor. See below for more information and my take about this market and how to play it to your advantage.
Why Overpay For a Home?
First off, I am seeing a lot of buyers OVERPAY for a home. How is that right and what is wrong with that? I have NEVER had a client OVERPAY on a listing. I do not believe in that as part of my business model and I think it’s setting up a buyer for a bad situation. Here is an example as to why this is a bad practice:
If you are looking at a home that is listed for $400,000.00 and let’s say it’s overpriced and it’s current value is only $380,000.00. If you are not a cash buyer, you will have to pay the difference of the appraised value compared to the purchase price you agreed to on the contract if you cannot talk down the seller(s). Now you are on the hook for coming up with $20,000.00 CASH as well as your closing costs (Sometimes that’s 3% of the sales price) and your down payment which is usually anywhere from 3.5% to 20%.
What Happens During a Drop in The Future Real Estate Market?
What happens if the marker comes down next year by 20%? This is simple math as to how much you will lose: $380,000.00 X 20%=$76,000.00 + the $20,000.00 in cash you paid + your closing costs of $11,400.00 + your down payment let’s say 5% which is: $19,000.00. Out the door, all of your expenses and down payment etc. will come down to a loss of -$126,400.00. I am not saying you will lose this kind of money soon, but we are artifically inflating our markets right now when people overpay on a home. That is happening all over the country right now, not just here in Las Vegas. Just keep this in mind!
Do You OVERPAY For Milk?
My question to you is this: Do you go to the grocery store and pick up a gallon of milk for $4.00 and go up to the cashier and say “I love milk and I am willing to pay $10.00 for this instead of $4.00? Does anyone do that? Really? Do you do that if you go to a car dealership and say I love that car and it’s $40,000.00. I’ll give you $65,000.00 for it! NO YOU DO NOT! So, why is it ok to do that with a home? It’s NOT OK! It’s setting you up for disaster financially.
Some people reading this post will not agree with me and my argument and I am totally fine with that. If you are a Realtor and you breach your Fiduciary Responsibility to protect a client, don’t act surprised if you get sued by them a year from now. I have seen that happen to Realtors here in Las Vegas years ago. You have a responsiblity to your client to represent their best interests, not yours. Having someone overpay for a home makes ZERO SENSE! Take the emotions out of the transaction, have a heart to heart conversation with your buyer(s) and educate them about how bad things can turn out for them if they go against your advice.
At some point, our markets will catch up to us. When is the housing market going to crash? There are a lot of foreclosures on the horizon right now that will hit our markets soon, I personally think within the coming year. The only thing right now that is holding up this artificial market is DEMAND. Once we take away DEMAND, the market will not continue to be as great as everyone thinks it is. It’s not ice cream and cotton candy right now. If you are in the market to buy a home, make sure you sit down and talk about the pro’s and con’s of being a buyer in a strong sellers market. Make sure your Realtor educates you and is your advocate. It’s really that simple!
CNBC Article Link:
When is the housing market going to crash? Check out the CNBC Article here: https://www.cnbc.com/2021/04/13/when-is-the-housing-market-going-to-crash-consumers-ask.html
Call me anytime if you have any questions about Las Vegas Real Estate.