Are We Going To Experience A Demand Bubble?

The real estate market right now is interesting to me. It feels like there's a bubble forming, but it's not exactly like the one we witnessed back in 2008. Rather, we're experiencing something different—a demand bubble. The limited inventory available coupled with interest rates lingering around 6% to 7% has caused both buyers and sellers to hesitate, adopting a wait-and-see approach to gauge the direction of the real estate market.

What's interesting is that while buyers continue to hold off, the pool of potential buyers keeps growing. From the conversations I've had, it seems many buyers are playing the waiting game, closely monitoring the fluctuation of interest rates—wondering whether they will rise or fall.

Consider this scenario: if someone is a buyer and is waiting for rates to drop, imagine how many other buyers share the same mindset. Now, what happens when rates actually do take a dip? It's highly likely that we'll witness a surge of buyers entering the market, driving up home prices even further and intensifying the competition we're already experiencing.

What would happen if someone decided to buy a house today, at the current interest rate? They mostly like would be locking in an interest rate. The if interest rates do eventually drop, they would have the opportunity to refinance at a lower rate and they would have secures the property at a lower price before the market got flooded with eager buyers. On the flip side, even if rates happen to increase after they purchase, they'll be glad they made the move when they did because they locked in a lower interest rate.