Are we in the middle of a housing market crash? This is a question I hear everywhere from buyers and sellers and even real estate agents and it's the worst, running around like chickens and screaming, â€œThe sky is falling!â€
To answer this question, first, let's take a look at what we know:
In the last two months, interest rates have almost doubled and this has caused buyer pre-approval amounts to plunge. The buyer that was approved to buy up to 800K can now only buy for 600K. Lenders have tightened lending qualification parameters in order to protect themselves against the unknown, and much to the buyers' chagrin, home prices have not come tumbling down after interest rates.
We know that along with rising interest rates we have out-of-control inflation, and all signs in the US economy say that we are barreling into a recession like a non-stop freight train. This is what's causing all of the speculation and the buzz and the naysayers to start naysaying.
So what is going to happen??
Let me first say that I cannot predict the future and I don't have a crystal ball. However, I do know that just because we have all of these contributing factors does not mean that housing prices will fall.
What we have seen happening in the real estate market is a decrease in buyer activity as buyers go through a sticker shock period. Once lenders start to recover and relax some of the recently tightened lending restrictions that they imposed we will see the market start to surge again, probably in late summer or early fall as we did during COVID.
In regards to pricing, what we are seeing is that price increases have slowed significantly, and while buyer activity has certainly decreased it has not ceased, and correctly priced homes that are introduced to the market are still selling at a rapid pace.
What we are also seeing is those sellers who decided to push pricing norms and introduce their properties at a significantly higher price than the market would bear, are feeling the pressure of sitting on the market, getting few if any showings, and will end up reducing their price to chase the market down. While this will create the illusion that prices are coming down, I think that if you look at the overall market you will see that even during this time when we will see overpriced seller decreasing their pricing, the average home value will continue to increase across the country.
The Bottom Line
Yes, we are in a changing market, but guess what, the market is always changing, and sometimes it just changes so rapidly that it causes us to stand up and pay attention. While constantly changing, overall our real estate market is very healthy and all signs point to the fact that it will continue to be so, despite current economic conditions.