New data from Bloomberg shows that mortgage applications for home purchases have recently fallen to their lowest level since 1995. Even lower than in the Great Recession of 2008. Even though we have a much larger population today.
Why aren’t people applying for loans to buy homes? What does it mean for real estate investors?
Why No One Is Buying Homes Anymore
Bloomberg cites high interest rates as the chief culprit for the massive drop off in home loan applications.
This of course comes in tandem with high house prices, and dramatic inflation in living costs, which have greatly driven up the overall cost of owning a home, and daily life.
On top of this, recent bank data shows that borrowers have been defaulting on residential, commercial, business, and auto loans at an even greater rate this year. As well as credit card debt. Meaning many are facing deteriorating credit scores as well.
On top of this is the fear and uncertainty around the job market, retirement account performance, and direction of the economy. Keeping the few qualified buyers mostly out of the market. Even though there are pockets of high activity and house price growth. Chiefly in affordable cities, and wealthy enclaves.
Another overlooked factor here is the implementation of AI in credit making decisions and customer service chatbots. People already don’t trust the banks. They trust AI even less. Without the ability to get human customer service many would prefer not to gamble on even applying for a loan.
While there are still opportunities to acquire distressed assets and flip them to funds and other cash rich buyers, it is a fantastic time to be a landlord.
Rents are up, with many properties ripe for rental rate increases. America’s massive renter pool is growing, and they are becoming a captive market, with little choice but to rent for the next 7 to 10 years.
At the same time landlords are looking forward to reducing costs as inflation caps out, and benefiting from operational efficiency thanks to new technology, and discounts on inventory.