We like this recent article from Baron News from this week and felt it was worthy to share.
“Rising interest rates and slightly lower demand in the market has caused many people to believe that a housing crash is imminent. Despite some signs that the market is slowing down, you shouldn’t get too worried or excited about the possibility of a housing crash.”
The article continues on to compare the current state of worry for some vs. the actual trends that we are seeing and how they are may be leaning toward a positive outlook.
Let’s break it down to a few key points:
- Inflation in the U.S. has been on the rise since mid 2021, reaching a 40-year high of 8.2% in September.
- To combat the increase in inflation, the Federal Reserve has increased interest rates multiple times throughout 2022, making it more expensive to borrow. With doubled mortgage rates this year, some buyers have hit the pause button on their home searches and sellers have been receiving fewer offers on their properties on average.
- Another factor at play is the Russian-Ukraine war. A ban on Russian oil has driven up energy prices, which in-turn has led to more inflation. These rapid changes in consumer prices and home prices have been jarring for many consumers and have stirred concerns of a recession and/or housing crash.
So where’s the good news?
- The U.S. job market remains strong.
- Consumer spending is steady despite the effects of inflation.
- Buyer demand is still high.
- Many millennials are expected to buy homes for the first time in the coming years.
- In 2021, first-time homebuyers made up the largest share of homebuyers at 34%. Since there are a high number of first-time buyers in the market, it’s likely that demand will continue to be strong for the foreseeable future.
- Housing inventory remains near historical lows. A housing crash usually happens when there is excess inventory and extremely low demand.
- Lending standards are much stricter today than in 2008, reducing the number of loan defaults and foreclosures.
- As long as home values and demand remain high, there isn’t much that can cause the housing market to crash.
- If you want to buy a home, property values might drop slightly throughout the remainder of 2022, however you shouldn’t expect a sizable drop anytime soon.
Baron News seems to feel that there isn’t any indication that there’s going to be a significant downturn in the market. Our team is one to look on the bright side of things, so we are going with it!!
If you have any questions on the current state of the market and what it means for both buyers and sellers, we are happy to help you navigate your decision making when it comes to buying or selling property.