You’ve probably seen the headlines lately that we’re headed into a recession, interest rates are spiking, inflation is up, and the housing market is softening. So, what’s happening? Is it all bad news? Is this 2008 all over again, and the housing market is about to crash?
Well, while us mere mortals can’t know the future with certainty, we can look at the facts and draw reasonable inferences. Here are a few facts to consider:
● Rising inflation, rising interest rates, and the economy entering a recession have not been historic predictors of a drop in housing prices.
● In 2008, we had a historic over-supply of houses—roughly 3.5 million houses for sale1— and at the same time, many people were going through foreclosure and unable to purchase. This supply and demand mismatch is what drove prices down. Lots of sellers & few buyers = falling prices.
● In the last few years, we’ve had lots of buyers, and few sellers, which has driven prices up.
What happens next? Well, we now have roughly one million houses for sale nationally2, which is only a fraction of the level of supply that previously caused prices to drop. My prediction: the days of huge year over year price increases in real estate are over, and we’re entering a more balanced, typical real estate market. Houses may take a month or more to sell, prices will level out (rising only 1% to 5% each year), and buyers will have more choices when selecting a house.
So, what does this mean for you?
Sellers: You don’t need to panic sell right now. Whether or not you sell right now has much more to do with your personal life situation. Is now a good time for you and your household? Can we locate another home that’s suitable? Is the home you’re in now a poor fit for your life situation? Those are the kinds of questions you should be asking–and if the home you're in now is working out great for you, stay put!
Buyers: If you’ve been discouraged by the past real estate market, take heart! We’re seeing a return to the days of home inspections, appraisal contingencies, and more homes for you to choose from. If we can find a home that’s a good fit for you, take advantage of it. If you’re not seeing anything right now that works for you, keep waiting–more houses will come! But don’t wait for prices to drop across the board–that day is unlikely to come.
In summary: selling and buying has much more to do with your current life and financial situation than anything else. Don’t get caught up in panic about the market, and don’t put your purchase plans on hold waiting for price implosion.
Dive into more data and details by checking out Dave Ramsey’s Housing Market Predictions 2022: Will It Drop? article.
Want to talk more? Give me a call! I’m happy to help you think through your personal situation and see what makes sense for you.
