You’re probably aware that the economy is in poor shape. The inflation rate is at its highest level in 40 years, the interest rates have doubled from early this year, while real estate prices are literally on the rise.
The United States’ economy naturally expands and contracts. Expandions are usually a sign that the economy is in good health and last for several years. A recession is a period when the economy contracts by more than two quarters consecutively. This means that we must slow down, hopefully only a little. That is a recession. It usually lasts less then a year.
Because it was fun, we printed and spent way too much money. Inflation kicked in and the Federal Reserve is trying slow down things a bit.
We don’t know whether we are currently in recession, but the housing market is experiencing a reset right now.
- Interest rates have risen
- Monthly mortgage payments up
- Less buyers and renters are eligible, so housing prices will fall. However, there is still a shortage of homes to rent or for sale.
Consumers should recognize that interest rates will remain in the 6%-8% range for at least the next few years. This is a more common range. To stimulate the economy, the super low rates that we witnessed during COVID-19 were sub-sidised.
Second, determine the length of your occupancy. If you plan to move within four years, rent now and buy now if your plans are to remain there for at least four.
Buyers should marry the house but not date the rate. Refinance as soon as rates fall below current levels. We will soon see another round of stimulus and the Fed will lower rates. Your home will be worth much more in the future than it is now. Take a look at ARMs. Make sure your pre-approval letter matches your offer.
Sellers, adjust your expectations to the current market conditions. There are no longer any 10 over-priced offers for the first weekend. Buyers who are still interested in buying a home are extremely price-sensitive. Consider pricing your home realistically. You might consider upfront payment for an appraisal. A prepaid 2-1 rate buydown can help you attract buyers.
The bottom line is that the US housing market is starting to cool down. It has been so hot for so long that most sellers aren’t ready to accept less than their full value in most markets. We aren’t seeing realistic asking prices discounted and don’t expect to soon.
It is still a buyers market and there is a severe shortage of homes for sale.
There are no reasons for home prices to fall or interest rates to drop in the next six to twelve months. We don’t believe we will see another housing crash as in 2008. Forget about foreclosures anytime this year.
Original Blog: https://www.fox5atlanta.com/news/what-buyers-and-sellers-need-to-know-for-a-real-estate-recession
