Real estate tycoon explains when house prices will start to drop and 'open the floodgates'
Rising home supply and anticipated lower mortgage rates to come will "open the floodgates" for a real estate market "boom," says RE/MAX's chairman and co-founder.
Over the next year, two macroeconomic indicators may align and create booming opportunities in real estate, according to RE/MAX’s chairman and co-founder.
"I estimate that there's between 9 and 11 million people who want to be homeowners that can't afford to be homeowners right now," Dave Liniger said on "The Claman Countdown," Monday, "because of the cost of the interest rate, or because they already got a house with a very low interest rate that wouldn't transfer to the new purchase."
"[But] all of a sudden, we're getting more inventory on. It makes for a quick sale. There's lots of buyers," he continued. "So as the inventory increases, you'll start seeing price pressure, and you'll probably see some price relaxation throughout the country."
Liniger’s comments come as the cost of buying a new home just hit another all-time high, new data from Redfin shows.
REAL ESTATE RISING STAR POINTS TO NEW DIRECTION THAT COULD ‘DISRUPT’ ENTIRE HOUSING MARKET
The median U.S. home sale price soared to $397,954 in June – a nearly 5% increase from a year earlier. That marks the highest level on record and the biggest annual increase since March.
Thus, the monthly mortgage payments at that price, when accounting for the 6.86% median interest rate for a 30-year mortgage, is now $2,749. That figure is reportedly $88 shy of April’s record high.
RE/MAX’s co-founder expanded on his prediction that market pressures could finally start to cool from years of underbuilding homes and the Fed’s aggressive rate campaign.
"Our homebuyers have been used to a 15-year period of the lowest interest rates in the country's history… And so they're reluctant to move out of that into something that's 7 or 8%," Liniger explained.
"It's important to understand: the average interest rate since we started RE/MAX in 1973 is 7.78%. But this 15-year period has thrown everything out of kilter," he added. "So if you start seeing the interest rate dipping down towards 6%, 5.9%, I think it would open the floodgates."
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Economists predict that mortgage rates will remain elevated for most of 2024 and that they will only begin to fall once the Federal Reserve starts cutting rates. Even then, rates are unlikely to return to the lows seen during the pandemic, with investors predicting just one or two rate reductions this year.
But Liniger reiterated that "it'll take a year," but that, "over the next year, you're going to see a tremendous rebound in the real estate industry."
FOX Business’ Megan Henney contributed to this report.