(Data in this podcast courtesy of YCharts and FactSet)
Today, Alex Cabot and Ed Lambert of Birch Run Financial dive into the residential real estate market, where interest rates have climbed, but home prices remain high.
Ed begins by giving us some context. From late 2019, to late 2021, prices had risen by 29% to $423,000, and interest rates had dropped to about 3%.
Why haven't home prices dropped significantly despite higher interest rates? Ed explains that a lack of supply plays a significant role. The demand has decreased somewhat, but the supply has decreased just as much, keeping prices high. He uses the example of first-time homebuyers facing a challenging market.
Alex takes the historical perspective, discussing how interest rates have doubled from their 10-year average post-financial crisis. He emphasizes that while today's rates seem high relative to recent years, they are not statistically anomalous in the broader historical context. He also explains the concept of home prices relative to disposable income.
Alex underlines the advantage of a 30-year fixed-rate mortgage, which offers a one-way valve. You can negotiate it down, but your bank can't negotiate it up. Your payments stay the same, but your income typically rises over time, making the mortgage more affordable in the long run.
You can always email Alex and Ed at info@birchrunfinancial.com or give them a call at 484-395-2190.
Or visit them on the web at https://www.birchrunfinancial.com/
Alex and Ed's Book: Mastering The Money Mind: https://www.amazon.com/Mastering-Money-Mind-Thinking-Personal/dp/1544530536
Any opinions are those of Ed Lambert and Alex Cabot and not necessarily those of RJFS or Raymond James. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. The examples throughout this material are for illustrative purposes only. Raymond James does not provide tax or legal services. Please discuss these matters with the appropriate professional. Diversification and asset allocation do not ensure a profit or protect against a loss. Past performance is not indicative of future returns. CDs are insured by the FDIC and offer a fixed rate of return, whereas the return and principal value of investment securities fluctuate with changes in market conditions. Securities offered through Raymond James Financial Services, Inc. Member FINRA/SIPC. Investment advisory services offered through Raymond James Financial Services Advisors, Inc. Birch Run Financial is not a registered broker/dealer and is independent of Raymond James Financial Services. Birch Run Financial is located at 595 E Swedesford Rd, Ste 360, Wayne PA 19087 and can be reached at 484-395-2190.