The momentum that’s been driving this housing market could not last forever, and it’s finally starting to slow down. With the market crash of 2008 not so distant in our minds, it’s hard not to feel the dread of another housing bubble bursting. Here's the good news: we are not in a bubble, so it’s not going to burst. The current market is different. Here’s why.
Inventory Is Growing
Our current market became an inferno, not because there were too many buyers searching for homes, but because there weren’t enough homes for sale. Now, inventory is rising, but so are interest rates. These increasing rates are putting buyers on the fence. With more inventory on the market coupled with less demand, sales are taking longer and home prices are being reduced.
As the year goes on, we’ll likely continue to see more houses for sale, houses spending a longer time on the market, and fewer bidding wars. This is a sign that the market is normalizing, which is a good thing.
Interest Rates Are Increasing
As interest rates have spiked, demand for homes has lowered. Buyers are watching and waiting for both mortgage rates and home prices to fall, causing the market to slow down.
On the bright side, interest rates will eventually decline. Like the market, they go through ups and downs, and the rates can’t stay high forever.
Experts are predicting that we may be entering a recession. In the same way that a slowdown in the housing market is not a cause for alarm, a recession is part of the normal economic cycle. A point to keep in mind is that interest rates frequently drop at the end of a recession, which usually lasts about a year.
If the only thing stopping you from buying a home right now is the interest rates, remember that they will come down again. Buy now, build equity, and refinance when rates drop. Just ask me how.
Home Values Are Growing Faster Than Inflation
Although home prices are being reduced, home values continue to rise. If a home was overpriced in the hot market, the price has to come down now in order to sell. Values, on the other hand, are still going up, just at a slower, more sustainable rate.
Since the 1970s, home prices have generally appreciated faster than inflation. Even in a seller's market with high interest rates, buying a home is still a good investment. Your equity will continue to grow as the value of your home increases.
Buying and Selling
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The housing market is certainly not headed for a crash, but it is experiencing some stagnation. It is changing. If we continue to see more houses enter the market while buyers wait and watch interest rates and prices, we could soon enter a buyer’s market. But if the inventory growth slows down, we could stay in a seller’s market, although it would not be as strong as what we've been experiencing recently.
The market we have been in was not sustainable. It was only a matter of time before it slowed down and evened out. If you are interested in buying or selling, this market should not hold you back. Ready to experience a hassle-free transaction with a knowledgeable agent to assist you? I am here to help.