What’s up everyone!
Today we’re going to go take a look at Fortunes latest article on the GREAT RESET, a NY Times article that came out last week called “What’s Up With the Crazy Housing Market?” And Redfin’s latest data on the current housing market.
Are the insider experts still calling the housing market a correction or is a more drastic crash imminent. We’ll go through it all!
So, let’s dive right in!
In June, Federal reserve chairman, Jerome Powell was very clear when he said he wants to see the U.S. housing market return to a more balanced state.
He called it a “RESET”.
As we know the Fed Reserve hiked rates dramatically the last few months which cause mortgage rates to respond in kind.
According to Lance Lambert of Fortune, “Once the Fed made it clear this year what lay ahead for monetary tightening, markets quickly pushed the average 30-year fixed mortgage rate above 5%.”
Since December, mortgage rates have nearly doubled — rising to around 6 percent, the highest they’ve been since 2008.
Kaysen gives this example in The NY Times article: In January, a buyer would have paid around $2,100 a month in principal and interest for a $500,000 home loan. Today, that same loan would cost about $2,900 a month.
That’s a BIG difference. Imagine what you would do with $800 a month or close to $10k a year. I can think of a lOT of things!
Many buyers simply cannot absorb that kind of increase, particularly when it’s combined with incredible high home prices, which rose more than 20 percent since last year. So they are getting priced out of the market.
According to The NY Times, Experts aren’t anticipating that rates will return to the elevated levels of the 1970s and 1980s — they peaked at 18.4 percent in 1981 — but until inflation recedes, they will keep rising.
Greg McBride the chief financial analyst at Bankrate.com. said “If we get more inflation numbers like we did a couple of weeks ago, there is no telling how high mortgage rates could go.”
Fed chair Powell told reporters last month that “ if you are a homebuyer, you need a bit of a reset. We need to get back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again,”
He goes on to say
“We saw [home] prices moving up very, very strongly for the last couple of years. So that changes now. We are well aware that mortgage rates have moved up a lot. And you are seeing a changing housing market. We are watching it to see what will happen. How much will it really affect residential investment? Not really sure. How much will it affect housing prices? Not really sure.”
Do you ever feel like a puppet in the in the money holder’s hands??
Clearly his plan is working. Across the country, the Housing market is cooling down.
Some lead factors are-
Mortgage applications are down 17% on a year-over-year basis, according to the Mortgage Bankers Association.
Inventory has gone up drastically in the last few months.
According to Fortune‘s analysis of realtor.com data.- Among the nation’s 100 largest housing markets, the median market saw inventory rise 1% between January and April. That was before spiking mortgage rates kicked off the housing correction. Among those same 100 largest housing markets, the median market saw inventory rise 50% between April and June.
In The NY Times, Kaysen writes –
The frenzied environment we had become accustomed to — with its eye-popping price increases and bidding wars that left buyers dejected and sellers giddy — suddenly seemed to be a thing of the past. While buyers stood on the sidelines, recalculating their much larger mortgage payments, sellers began to realize that offers of $100,000 or more over asking might not be forthcoming.
We’re also seeing more and more price reductions.
According to the latest Redfin report for the four week period ending July 3rd, On average, 7% of homes for sale each week had a price drop, a record high as far back as the data goes, through the beginning of 2015.
According to the same Redfin report,
- Pending home sales were down 13% year over year, the largest decline since May 2020.
Redfin chief economist Daryl Fairweather said “The long-term outlook is still quite strong,” “But in the short-term, because of all the volatility in the economy, home prices might fall between now and next spring.”
Logan Mohtashami, lead analyst at HousingWire told Fortune, “We still have some work to do to get a balanced market. However, with higher rates, we have a shot to get back to peak inventory levels in 2019, which is a balanced market,” “All my inventory issues go away once we are back to 2019 levels, and only then can I remove the savagely unhealthy housing market theme.”
But lets be clear. Even with inventory rising, we are still way below pre-pandemic levels.
Fortune’s Lambert notes, Among the 917 regional housing markets measured by realtor.com, 601 markets are still at least 50% below their pre-pandemic level.
With still so little inventory and people still wanting to buy homes, prices are unlikely to collapse. They may correct but that is different than a full blown crash.
Rick Sharga, an executive vice president of market intelligence at ATTOM, a real estate data company said “People waiting for home prices to fall are probably going to be disappointed,” “This is not 2008 all over again — we’re not looking at a housing bubble.”
Now I know from some of your comments that this is not a very popular opinion and some of you think that all of these insider experts are trying to manipulate us into buying now by saying we are not in a housing bubble thats about to burst.
And you may be right, but I tend to look at the data rather than the drama.
Unless we have a HUGE surge of inventory in a very short time frame, I don’t see the market crashing like 2008. Correcting, yes. And that’s a good thing. This sellers market has been unsustainable and really hard for buyers. I work with both buyers and sellers so I’ve experienced both. And as much as I’m really happy for my sellers, my heart hurts for the buyers. Its really hard to see them losing house after house or paying way more Than they would in a normal market. I’ve been saying all along in my videos that I really prefer a more balanced market. Its just better for everyone.
So, lets see what The NY Times says abut buying right now-
Kaysen writes with so many mixed signals, buyers may want to wait out the summer or even the spring of next year.
If prices do continue to correct, it could return to one that resembles a prepandemic normal, with homes that take a few months to sell and prices that increase gradually.
Buyers may be able to start asking for appraisals, inspections and mortgage contingencies. And as inventory increases, they may even be able to take their time before jumping on the first house that comes on the market.
And if rates go down, you can always refinance. As my lender friends say “ “you date the rate, but marry the home.” It’s better to get a home at a reduced price (even with a higher interest rate) than an over priced house with a low interest rate if you are planning on staying a while to get through different cycles.
As far a selling right now-
The Times article says “The time has come for sellers to reset their expectations. List your house today, and it is unlikely that 24 hours from now you will get to pluck an all-cash bid that’s $150,000 over list price from a sea of contingency-free offers.”
“Those days are over,” said Lawrence Yun, the chief economist for the National Association of Realtors. “Don’t expect multiple offers.”
Kaysen goes on to say that Those planning to sell in the next year would be better off doing it sooner rather than later. But if you can wait until the market settles into a new rhythm, you may have a better sense of what to expect two or three years from now.
I agree that its still a great time to sell with inventory being still so low. But you have to price it right and market it fully. If the house looks great and is in good condition it will still sell fast and for a high price. At least here in the DC area.
Whats happening in your neck of the woods? Comment below. Price reductions? Multiple offers?
The problem some sellers are having is where do they go? Do they trade in their low interest rate for a higher one? Or do they rent?
Kaysen calls the rental market “The Hunger Games,” as rents skyrocket and would-be renters in cities across the country compete with dozens of other applicants.
She says that according to RentCafe, Nationally, the vacancy rate is below 5 percent, with more than a dozen renters competing for any given vacant apartment which translates to very high rents.
“The forecast does not look good for renters, in the short-term or the long-term”.
Rising mortgage rates will push some buyers out of the sales market, putting more pressure on the rental market. And as rents climb, even fewer people will move. With no relief in sight for the inventory shortage, renters have few options.
So what should renters do?
Kaysen suggests If you can renew your lease, even at a higher rent, the odds are that will be cheaper than moving. You could consider taking on roommates, or looking at cheaper neighborhoods. But none of the options are pleasant, and no one has a crystal ball to predict what the future holds.
So, this puts people in a lose – lose situation.
At least if you buy, you control your monthly amount for the next 30 years unless you refinance and make it lower.
While buying with a higher interest rate may sound like a bad idea, the renting option sounds even worse.
What are your thoughts? Buy or Rent? Comment below and when you do, give us an idea of your age so we can see where you are in life as far as your future plans.
Lets end this video with some real data from REdfin’s latest report to see the upcoming trends. Redfin’s data in this report covers the four-week period ending July 3.
- The median home sale price was up 13% year over year to $396,000. This growth rate is down from the March peak of 16%.
- The median asking price of newly listed homes increased 15% year over year to $399,973, but was down 2.1% from the all-time high set during the four-week period ending June 5.
- • New listings of homes for sale were down 1.4% from a year earlier.
- Active listings (the number of homes listed for sale at any point during the period) fell 2% year over year—the smallest decline since October 2019.
- 45% of homes that went under contract had an accepted offer within the first two weeks on the market, down from 49% a year earlier.
- 32% of homes that went under contract had an accepted offer within one week of hitting the market, down from 35% a year earlier.
- Homes that sold were on the market for a median of 18 days, flat from a year earlier and up slightly from the record low of 15 days set in May and early June.
- 52% of homes sold above list price, down from 53% a year earlier. This measure peaked in mid-May and has declined 3.8 points since then.
I hope you got some value out of today’s video. It takes a lot of work but I really want you to have the most updated information so you can make the best decision for you and your family.
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If you want to see more housing update videos, check out these two.