Home News After 2 stormy years of ‘moonshot’ house prices, don’t hold out hope for a major correction. Why COVID-era property values may be here to stay.

After 2 stormy years of ‘moonshot’ house prices, don’t hold out hope for a major correction. Why COVID-era property values may be here to stay.

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There is hope for first-time buyers looking to enter the US housing market, but observers say they have to be patient.

After a two-year surge in home prices during the COVID-19 pandemic, the housing market is finally showing signs of chilling. Insufficient quality inventories, inflation affecting raw material costs, and volatile stock markets.Sale of new homes Fallen in the 4th month in April Continuing to the lowest level since the pandemic began.

Affordability remains a challenge. The average home selling price for the first quarter of 2022 was $ 428,700. 30% increase from $ 329,000 In the first quarter of 2020. Mortgage rates soared from 2.75% to over 5.25% in the fall of 30 years. Redfin

8.2% of homes Worth over $ 1 million Two years ago, 3.5 million homes, or 4.8% to 6 million homes nationwide.

Prices in the pandemic era may stay here for now. Greg McBride, Chief Financial Analyst at Bankrate.com, a personal financial site, said: “This benefits first-time buyers by allowing income to” catch up “somewhat with the cost of owning a home, but this is not the next two to four months, but two to four. Deploy over a period of years. “

“”House prices are weeping. The average home selling price was $ 428,700 in the first quarter of 2022, up 30% from $ 329,000 in the first quarter of 2020.

— YouGov

McBride warned that he could be a buyer who wants a major price cut. “Sellers have put their homes on the market and asked for moonshot prices,” he said. “In a neighborhood where homes were sold for $ 600,000 a year ago, sellers may now be asking for $ 800,000. Indeed, they lowered prices a bit and eventually For example, you might have to sell for $ 725,000, but it’s still much higher than the $ 600,000 you sold a year ago. “

According to a YouGov poll of 1,000 adults, only 6% of homeowners say their homes have fallen in value last year. Realtor.com last month Details of the median decline in home prices. This was small by the criteria of the Great Recession. These declines were arguably already happening in challenging pockets around the United States. Among the largest declines were Toledo, Ohio (down 18.7% from 2021), Rochester, NY (down 17%), and Detroit, Michigan (down 15.4%).

(Realtor.com is operated by Move Inc., a subsidiary of News Corp, and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.
+ 2.08%

Rod Smyth, Chairman of the Board of Global Asset Management Company RiverFront Investment Group, believes home prices are near or near peak, but prices can fall in overly speculative markets. “But we believe that most markets are more likely to” rust “than” bust “due to strong supply and demand conditions,” he said. “Rust means that nominal prices (unadjusted for inflation) may fall somewhat or stagnate around current levels for several years.”

That’s not without the significant risk of amendments, especially as the Federal Reserve is trying to raise interest rates without pushing the economy into recession. Of course, there is no clear consensus on how long or serious the recession will be. As GregHandler, Head of Mortgage and Consumer Credit at Western Asset Management Told MarketWatch: “Can you really see the fixes or overcorrections? I think there’s definitely a risk.”

“”Only 6% of homeowners said the value of their homes fell last year, and many of these declines are undoubtedly already happening in the difficult real estate market.

— YouGov

In contrast to the collapse of real estate in 2008, Bob Griffith, general manager of home services at Houwzer Mortgage, a Philadelphia-based real estate and mortgage broker, said credit standards remain high. “Homeowners are building equity due to soaring housing markets and can absorb a small shock in the event of a region of the United States where home prices are stagnant or declining for a period of time. Homeowners with good credit and equity will not mail the key to the lender and leave. “

Meanwhile, rising interest rates and home prices have kept many first-time homebuyers out of the home market. “Fixed rates for the entire period have recently leveled off in the range of 5.25% to 5.50%, after rising about 1.25 points since late March,” Griffith said. “And last week, there were signs that home prices could stabilize as inventory for sale increased and the proportion of homes purchased below list price increased. If these developments continue, the housing market. Will help new buyers considering entering the market. “

More promising data: More than half (58%) of Americans say they own a home, and nearly 30% report that they actually own a home completely. YouGov polls also found out. ((((US Census Bureau 5-year estimate, It turns out that a slightly higher share (38%) of homeowner units, announced in 2020, clearly owns the home for free. To enter the market, “McBride added.

The proportion of homeowners who own free and clear homes is due to the higher number of older Gen Z and Baby Boomers compared to Millennials and Generation Z. Millennial home ownership of 43% is well below the national average of 65%. , As of 2019, per estimate Freddie Mac Edit
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It cites “delayed marriage, racial and ethnic minority economic challenges, reduced financial stability, and increased debt.”

But even if it takes years, more opportunities to own a home for first-time buyers await. “Rising home prices and record low inventory of affordable homes for sale are also hampering home ownership,” Freddie Mac’s report on home ownership for the Millennial generation, released last year, found. “On the other hand, as more millennials reach the age of 40, the marriage rate will increase, income will stabilize, and the household formation rate will accelerate.”

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Rally on Thursday Fed’s latest meeting Central banks have suggested that they have made good progress towards raising rates by 50 basis points in June and July as the policy moves “quickly” towards the expected neutral interest rate. Shares of homebuilders, which were in a difficult situation in 2022, also rose on Thursday, including Meritage Homes.
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Lennar Corp.
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And Eagle Material
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