Jonathan Miller predicts the best time to buy

Data and research from Miller Samuel Inc, a real estate company


and consulting firm, manages some of the largest real estate agencies in the United States.

With over 30 years of experience in the real estate industry, co-founder Jonathan Miller has experienced a series of different boom and bust cycles in the real estate market and considers the most recent boom a “frenzy untenable”.

“This market with a fixed rate of 2.6% over 30 years [mortgage rate]you create that insatiable demand and you wipe out the supply,” Miller said during the June 24 Masters in Business podcast hosted by Barry Ritholtz.

“And so it’s become a real estate market of bidding wars,” he added.

Now the frantic market is starting to take a breather as 30-year mortgage rates rise to 5.7%, inflation rises and geopolitical tensions persist. This creates a very different real estate market environment.

“One of the biggest enemies of the housing market is uncertainty,” Miller said. “And we certainly have a basket full of them right now.”

The housing market began to slow around March this year as inventories fell following two years of insatiable demand at already low levels, Miller said.

“Looks like the Fed is late to the party because you can just see the national inventory clearing,” Miller said on the podcast.

Dan Morehead, the founder and CEO of $5 billion crypto hedge fund Pantera Capital, recently described this mortgage rate as a challenge for people not to buy homes.

“When the Fed offers to lend money at 2.68% to buy homes that are growing 20% ​​a year with leverage, they do it! Not just homeowners, but investors,” he said. said Morehead.

Now the downturn has turned into an affordability issue, Miller said. One of the main uncertainties is inflation, which remains high despite recent interest rate hikes.

Inflation combined with house prices at record highs means the U.S. housing market is becoming increasingly unaffordable, leading to a “significant pullback” in demand, Miller said. The National Association of Realtors’ monthly affordability index is at its lowest level in years.

“Nationally, depending on the metrics you’re tracking, we’re looking at a 20% increase in house prices and a doubling of rates. What else could happen; it’s a downturn,” Miller said. .

A slowdown is a view shared by Ken Shinoda, a portfolio manager at $122 billion bond boutique DoubleLine, who told Insider that investors should expect lower house prices. .

“Buyers see that properties aren’t moving as quickly, so they step back expecting prices to drop,” Shinoda said in the interview. “Sellers are going to have to start lowering prices.”

However, some real estate analysts and strategists have argued that since prices continue to rise in the face of rising rates, it shows the strength of the market.

Miller thinks it’s a lag in the data itself.

“New signed contracts were already starting to cool off in March and that eventually led to listing activity, which eventually leveled off or cooled sales,” Miller said. “I don’t think the price rise is the result of a change in composition. I think it’s really just a shift in the data itself.”

Even if the market cools, it will still take some time to fully capitulate, Miller said.

“I think the most common mistake people make is that they expect prices to come down immediately and it really takes a year or two for sellers to capitulate to market conditions.”

This time around, sellers might be quicker to capitulate, Miller said. But generally sellers don’t want to leave money on the table and feel they could have sold at a higher price, he added. Miller’s experience of the time lag between a market downturn and a significant price reduction is about a year and a half to two years.

Miller agreed with Ritholtz that based on this analysis, the opposite time to buy will be summer 2023.

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