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The Housing Market is Crumbling!

What’s up everyone

In the last few videos on the housing market, the most conservative industry insider has been Mark Zandi of Moody analytics. If. You watch my videos, I reported his insight that price appreciation would go to zero by this time last year. So I wanted to show you a clip of Zandi talking to CNBC on June 8th about the future of the housing market and then we’ll discuss.

Play Zandi to 1:04

So clearly, Zandi is saying that There’s a comeuppance coming in the housing market, but this is NOT the same as the bubble of 2008.  I know this is not a popular opinion – but this is not a CRASH like 2008. Its a correction, for sure. 

Lenders are much more  strict in their criteria and without the influx of inventory, a dramatic turn of the market from a sellers market into a buyers market simply isn’t possible. 

That being said, a correction has already started and will continue. He predicts that price appreciation will head to zero by this time next year and he may be right. 

Price appreciation has gone up 20% from this time last year. So to head to zero by the end of this year means prices will still be above pre pandemic levels. 

Let’s take a look at Lawrence Yun, the National association of realtors chief economist, and see what he is saying about price appreciation in the near future

Play Lawrence yun recording 

Ok. So Yun agrees with Zandi that price appreciation will slow down. I think we all agree. 

So, what is actually going on in today’s (end of June 2022) housing market? Are there REAL price reductions or are prices being reduced from an all time high to less but still more than they were a year ago.  Here are my thoughts-

We have fewer buyers than ever because the higher interest rates have priced out many buyers. As such, sellers have serious fomo and are trying to get the high prices of a few months ago.  

The kiss of death is when sellers price their homes based on the recent sales that just closed. Because as we have spoken about in previous videos, those sales have a lag time of 30-60 days and the market is simply not the same as it was a few months ago. 

Interest rates have risen dramatically and I don’t see them going down anytime soon. So sellers have “over priced “ their home and the few buyers that are left after the interest rate hike are on to them. They simply will not accept the inflated prices.  

Therefore, sellers MUST reduce their prices to get the buyers to buy. Once a price reduction is set, the house feels a bit stigmatized in this “sellers market” and may get punished for over pricing it to begin with. If a house sits on the market for more than a week and has a price reduction, buyers may overlook it completely. 

Let’s take a look at yun’s  response

So basically he confirms what I’ve been saying about “greedy” sellers not taking into account the recent mortgage rate hikes and conforming to reasonable listing prices. 

I think these next few months will be very interesting to see how sellers (and their realtors) adjust and how the market looks in a few months. 

Lets take a look at Fortunes’ article which talks about the Great Deceleration in the housing market.

Lambert spoke to Logan Mohtashami, the lead analyst at Housing Wire who said

“For me, the best part of the housing story in 2022 is the rise of inventory, as this will put home sellers and builders in check. They had too much pricing power and they pushed prices way too high,” says Logan Mohtashami, lead analyst at HousingWire.

Rising inventory is a direct result of higher interest rates between sellers fomo and less buyers. 

But – While inventory levels are rising fast percentage wise, they’re still far below pre-pandemic levels

Even if the Great Deceleration picks up steam, it will take time before we’re back to a pre-pandemic housing market.. 

“The housing market is still savagely unhealthy because [of low] total inventory levels in America,” Mohtashami says. “In order for us to return to a “normal” housing market,  we need to see national inventory rise to a range between 1.52 million to 1.93 million units.”

The National Association of Realtors’ latest reading has inventory at just 1.03 million units.

Mohtashami’s biggest fear is that mortgage rates begin to fall again and the momentum is lost. 

If that happens, the Great Deceleration may come to an abrupt halt.

“While I am very encouraged that inventory is rising on a year-over-year basis, we need it to stick and head a lot higher. My concern in the future is if the rates fall again, some of the inventory gains we had will go away,” Mohtashami says.

As we know, interest rates fluctuate daily but the fed reserve has indicated that rates will continue to rise. In my opinion, the only thing that could push them back down is if the economy suffers too much to sustain the higher rates. 

With the political unrest, an all time high on inflation and the general lack of confidence of the public, this is definitely a possibility 

I guess time will tell. Let us knob what is happening in y9ur market. I think real data is the best data because its in real time and told by those who are actually living through it 

Here in the DC area it’s neighborhood by neighhborhood, house by house. Ive literally seen a price reduction and multiple offers in the same neighborhood simply because one of the sellers over priced their house and didn’t show it in a professional light. Buyers aren’t falling for it anymore 

So if you’re thinking of selling, hire a professional, price it right and market it professionally. Give buyers the respect they deserve and you will be rewarded.

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