215: How “Switching Costs” Hold the Housing Market in Limbo w/Lance Lambert

05.09.2024 - By BiggerPockets Play

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The housing market has seen unprecedented home price growth in the 2020s. Already, we’ve almost beat the past three decades, and we aren’t even halfway through our own. And now, with home price growth slowing, many people wonder how we’re still in a position of high housing costs and low inventory. The answer is simple: “Switching costs” are holding the housing market in limbo, and the more you know about them, the more our current situation makes sense.

Put simply, “switching costs” are not only the financial but also the psychological costs of selling your current home and buying a new one. With mortgage rates close to double what most Americans have locked in, there’s a substantial financial consideration when purchasing a new home. Lance Lambert, co-founder of ResiClub and housing data authority, is on the show today to talk about home prices, housing inventory, and how “switching costs” influence both.

Lance details how our massive home price acceleration put many Americans in an affordability bind, making “switching costs” higher than in recent history. So, how do we cross the threshold to enter a time when “switching costs” are low, prices are stable, and housing inventory returns? Lance walks through exactly how to tell the direction your local housing market is going in and the data investors must look at to get a better sense of how home prices and housing inventory are trending.

In This Episode We Cover

“Switching costs” explained and why they’re keeping the US housing market in limbo

The “lock-in effect” that’s suppressing our housing inventory and keeping owners from selling

Inflation’s sizable role in the massive home price appreciation we’ve been seeing

The slow recovery in active listings and how far behind pre-pandemic levels we are

The one data point you must follow if you want to gauge how healthy your local housing market is

And So Much More!

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National home price growth this decade has already surpassed that of the entire 1990s and 2010s