Your friend just finished his 10th frame and there is still a pin standing. Hit the reset button. Directv is not working. Hit the reset button. Hot water heater not working after power surge. Hit the reset button. You get the gist of it. Market values in the Shelby County real estate market are going through the same ‘reset.’
I was at showing today in Germantown with an agent, a showing, and buyers were lined up to see this home. It was almost as if we were at an open house. Homes are selling almost as fast as C&A Photography (that’s me by the way) takes to turn our photos around for them to go up on the MLS. What is leading to this euphoria that our market has not experienced at least since I have started and that was in 2009?
Naturally, everyone looks at the basic supply/demand dynamic that we are subject to. There are not many new homes going up in Germantown city limits. Collierville is showing some activity but no where near enough to meet the demand of buyers who wish to live within 10-15 mile drive to Memphis proper. Memphis is also experiencing similar issues but only in certain price points and in certain areas (High Pointe, Midtown..).
This leads me to my point of a price reset. The homes that are selling are moving TOO fast. Multiple offer situations are as common as Rob Crump leaving for hunting came every Friday during deer season. Sellers can now set that price at the high mark regardless of comps. That data/value now must catch up after the downturn that we experienced back in 05-07. That is just it, will they catch up and if so, when? Homes that should sell, for example, per the comps at $300k, are now moving at $335k. And here is where the problems start. Where are appraisers going to find values to support these ‘new’ prices? Ultimately, the number of sales at the higher prices will catch up but in the meantime, get ready for a rocky road. I am glad I am not an appraiser.
So here is where the market must reset. In any market, you look to find a ‘bottom’ and a ‘top’. Right now, we are looking for that top, but this is not something that can happen in a few short months. Do you get the feeling where this is going?
On the lending side, I am already seeing the softening or lessening of guidelines for lower credit quality borrowers. Credit score requirements are lowering with some heavy overlays to get approved, but, nonetheless lower. Our guides are much more stringent than the ‘sign and buy’ days which is a good thing. Easier standards are now helping push prices up with the limited supply. Now the burden falls on the lender to make sure that a buyer is properly prepared and educated in the buying process and ultimately home ownership.
It seems that we are setting ourselves up for a huge year in sales. Rates are not going anywhere. Buyers are moving in. Supply is low. I can tell everyone associated in our market to enjoy this ride, but from an old trader’s point of view and not a mortgage lender, we are recasting a housing boom that we just got out of only a few years ago. If we are feeling it in Memphis, imagine what prices are doing in NYC, LA, Chicago and other larger markets? I guess I just can’t get the nerve to say it but here it is; bubble.