Welcome back to closing bell on shatter news. Everyone
we're buying a new home is tough right now.
We know that. But for first time buyers,
it's an especially challenging time. They're facing a rising
mortgage rates coupled with a record breaking home prices and
simply a lack of inventory. Well, mortgage rates
are expected to continue to climb as the Fed proceeds
with its plans to aggressively hike rates in an effort
to stifle inflation. And joining me now is Jonathan
, Miller president and Ceo of Miller Samuel, a
real estate appraisal and consultancy firm based here in new
york. Thank you so much for coming on the
show, Jonathan, if you are trying to buy
a new home now, how should you navigate this
housing market? Well, I'm gonna say something a
little bit unusual here. But one of the reasons
why affordability is so challenging for people trying to get
into the housing market is that mortgage rates have been
too low for too long. In other words,
low rates have actually made housing less affordable. And
the reason for that is low rates have created coming
out of the pandemic lockdown have essentially fueled this buying
frenzy that has burned off much of the supply.
So markets that might have a couple of 100 listings
for sale typically, or a neighborhood or a town
now have a dozen. And I would characterize that
as a collapse. So that's the challenge. The
way to look at it is the way this sort
of plays out is as rates rise, that reduces
demand because affordability is a challenge. And we start
seeing a little bit more inventory creep into the market
. It still won't be enough though. So I
would I would the way to look at this is
, you're just going to have to be patient.
I don't think we're looking at a correction on the
other side of this. I think what we're looking
at the words that we're going to be using,
going forward are going to be plateau or leveling off
because in this cycle, banks are relatively conservative.
So here's a question, Jonathan You do. It
sounds like you do not think we could see a
boom and bust in the housing market. Like we
saw in the early 2000s. Why is this time
different because in this cycle, the reason why housing
prices are rising so rapidly is not because of what
I would call financial engineering, liar loans, You
know, the products that were used during the bubble
, where if you, you know, had a
pulse, you could get a mortgage basically. Banks
are still were burned pretty badly from that era and
we're not seeing fast and loose lending standards. However
, what we've seen is mortgage rates too low for
too long and there's this insatiable demand. Um,
so the way to think of this is going down
the road, we're not going to have a banking
crisis, which we had during the financial crisis,
uh, simply because banks are a lot more conservative
than they have been in compared to 10 to 15
years ago during the bubble due to rising rates,
we were showing a graphic the 30 year fixed mortgage
now at 5% increasing several percentage points just since the
start of this year, Jonathan for a first time
. Homebuyer, How much more expensive? How much
less affordable does that make buying a home? Are
we seeing prices on homes all in up double digits
, for instance, because of the huge pop and
mortgage rates? Yeah, So I think uh in
many ways, if if you want to look at
the housing market that's going to be sustainable, have
sustainable growth, um uh and you want to see
prices moderate, you're gonna rising rates are going to
do that. I I think this is a really
good thing. The the sort of frenzy that were
we're probably going to be coming out of is simply
because rates are too long too low. And so
I know this is hard for people that are going
into the market for the first time. But the
idea here is that when, when it gets too
expensive sales flow and then inventory rises normal supply and
demand. And and I think it's somewhat encouraging to
people looking at the market now going forward over the
next couple of years versus if the Fed and rates
did not rise, I think we would right now
in many housing markets, half of the transactions are
actually selling it bidding wars in certain parts of southern
California. It's two thirds of the activity is selling
higher than the seller's asking for. That is not
a sustainable market. Do you think millennials will be
renters for life? I think that's the challenge,
right? Especially with some of the volatility that we've
seen of late, what's your take? Uh It
would be. No, I don't think so.
Uh 10 years ago, listen, I have three
millennials and one gen z and the three millennials of
all about houses in the last three or four years
. Um It does happen, whereas 57 years ago
I was thinking it would be impossible. Um So
I, I wouldn't despair, but it's, it's
going to be a, it's gonna be several years
out before prices really start leveling off. Alright,
Jonathan, Miller President and Ceo of Miller Samuel,
a real estate appraisal and consultancy firm, Jonathan,
thank you.