The real estate market has been experiencing an imbalance in the last quarter of 2022. This imbalance is creating an unaffordable real estate market, leading to an increase in rental rates and slowing home sales. Here are four main causes and possible solutions to this imbalance:

1) High Interest Rates

The Problem: The number one cause of imbalance in the real estate market is the high interest rates set by the Federal Reserve. The current average interest rate on a 30-year fixed mortgage is over 7%, up from 3.22% at the beginning of 2022. Higher interest rates make mortgages more expensive, leading potential buyers to hold off on purchasing a home.

Possible Solution: We need lower interest rates to stimulate the market and encourage people to buy. This could potentially be achieved through measures such as lowering inflation or implementing policies to incentivize lending.

2) High Home Prices:

The Problem: With the artificially low interest rates during the pandemic, home buyers flooded the market and drove up prices over the last few years. The other factor driving high home prices is a lack of supply. This can be attributed to homeowners choosing to stay in their current homes rather than sell them. Most homeowners have built up equity in their homes, and the cost to sell and purchase a new home may not be worth it.

Possible Solution: To address the issue of high home prices, we need to increase the housing supply. This can be achieved by encouraging homeowners to sell their homes, expanding available land for development, and streamlining the building process.

3) Low Inventory

The Problem: The housing supply is not meeting the demand, leading to less competition and inflated prices.

Factors contributing to low inventory include homeowners holding onto their properties for longer periods of time. Also, investors are buying up homes as rental properties rather than putting them on the market for sale.

Possible Solution: Again, we need to encourage new home construction, potentially by loosening building regulations and incentivizing developers to build more homes. Measures could be taken to encourage homeowners to sell their properties, such as increasing tax benefits for selling a home. Finally, government intervention could discourage investors from buying up homes as rental properties and instead encourage them to put the homes on the market.

4) Low Income

The Problem: Lack of affordable housing options for low-income individuals is also a big problem. Most people can’t afford the high home prices as well as the interest rates for mortgages.

Possible Solution: People need more money to be able to buy a home. You can achieve this by getting higher-paying jobs, doing multiple jobs, or starting businesses to save more to afford housing. 

The government could provide job training and education programs to help individuals increase their income potential. In addition, the government could provide subsidies and incentives for builders to construct more affordable housing options. This would give low-income individuals access to safe and stable housing.

Talk to a Texas Real Estate Broker to Learn More About the Local Market

Everyone needs to have access to a roof over their head rather than being left homeless or living in subpar conditions. However, the current real estate market is becoming increasingly imbalanced. If you want to buy or sell a home in Texas, feel free to connect with me. We’ll discuss the current market trends and how they may affect your decision.