Home News Is the housing market really crashing? Redfin’s chief economist shares her predictions

Is the housing market really crashing? Redfin’s chief economist shares her predictions

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This article escape home, a newsletter for those who want to become second home owners.apply here© 2022. All rights reserved.

With inflation high and interest rates continuing to rise, there has been a lot of speculation about the housing market, with many throwing around the word ‘crash’. this week, escape homes Danielle Hyams checked in with Redfin’s chief economist, Daryl Fairweather, to find out exactly what was going on.

EH: What impact will rising interest rates have on prices and demand?

Fine weather: Interest rates have actually reduced demand. The median monthly mortgage payment for a home is almost 40% higher than it was a year ago, significantly reducing buyer budgets. This is why we are seeing a slowdown in prices, demand and sales.

EH: Does that mean there’s a potential shift from a seller’s market to a buyer’s market?

Fine weather: If you have a mortgage approved and a home on the market within your budget, I think you have the upper hand.

EH: Will the tight labor market have an impact on housing?

Fine weather: Help people move. So one of the things that’s happening is that people are leaving the markets where home prices are the highest. Places like the Bay Area and Los Angeles — not so much New York, New York are a different picture — but those expensive West Coast markets are down significantly, especially for million-dollar listings. People are packing up and moving elsewhere because it’s not worth the multi-million dollar local prices. With the labor market so tight, it is a viable option. If you are in a remote location, you can take over your work. Or you can easily find a new job elsewhere.

EH: Speaking of remote work, has there been any impact on the housing market with remote workers being brought back into the office?

Fine weather: No, I don’t think it happened enough to make a difference. Perhaps New York City has all the pandemic-era apartment discounts and people were really afraid to live in New York during the pandemic, but many people want to come back to New York. Some people would love to be in the office there, but it’s still not back to pre-pandemic conditions.

EH: What about the second home market?

Fine weather: The second home market is much cooler than it was during the pandemic. With interest rates rising and the economy weakening, people aren’t buying second homes when they’re worried about their stock market portfolios.

EH: Many purchases were driven by investors during the pandemic, has that changed?

Fine weather: Investor purchases have plateaued since peaking in 2021. I think investors have moved forward in terms of when they bought because they are pretty savvy. They saw how low interest rates are for 2020 and 2021 and that’s why they jumped to the market. But with interest rates higher and investors less bullish on housing market growth, it’s not a great investment. If interest rates go down, I think it will come back soon.

EH: Any predictions about when interest rates will drop again?

Fine weather: If we are in recession, they will be depressed. Alternatively, if inflation starts to subside and the economy has a soft landing (which the Fed is aiming for), interest rates will slowly fall.

EH: Does that mean I should wait to buy?

Fine weather: You don’t have to worry about mortgage interest rates. Because you can always refinance later. Rather, it is important to be able to purchase a home at a typical mortgage interest rate that lasts for five years. If you can do it now, you’ll be able to refinance later, further reducing your mortgage.

EH: What are your predictions for the next six months? Will the housing market really collapse?

Fine weather: It really depends on the course of the economy. If inflation persists and the Federal Reserve has to keep raising interest rates further than it currently plans, interest rates will rise and the housing market will suffer. Once inflation starts to subside and the Fed can back off on rate hikes, I think things will probably level out and home prices will be basically at last year’s levels heading into 2023. In a recession — I think the same scenario would occur in a mild recession. A wash, as interest rates fall and some people turn to buying homes, while the recession itself cools demand. In the event of a severe recession, he thinks housing market prices could fall by 5%.

This article escape home, a newsletter for those who want to become second home owners.apply here© 2022. All rights reserved.

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