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Softening Real Estate Market Presents Big Opportunity for Investors

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  • According to the Federal Reserve Bank of New York, consumer sentiment towards rising home prices is changing rapidly.
  • Mortgage applications have also dropped significantly compared to the same period last year.
  • During a recent refinancing, some investors withdrew cash to jump into transactions in softening markets.

The housing market has undergone significant changes in recent months after one of the most dramatic real estate bulls in recent history has been carried out. More indicators show the softening of the real estate market, which means that patient investors who have been waiting for a hot market since the start of the pandemic could be rewarded brilliantly in the near future.

Fewer mortgage applications, higher price cuts and slower expected home price increases all indicate a softening of the market.

One of the recent indicators that is increasingly pointing out the slowdown in the housing market is the Federal Reserve Bank of New York’s Consumer Expectations Survey. The Latest statistics from June survey results Consumers reveal that median home price growth is expected to slow to 4.4% next year. This is down from the 5.8% price increase a year ahead that consumers expected in May.

In the years leading up to the pandemic, consumer sentiment towards rising home prices in the previous year ranged from 3% to 4.5%. The 4.4% price increase is above the average consumer estimate over the past few years, but has fallen sharply from the June 2021 pandemic peak of 6.2%. The median price volatility in the previous year was 6% at this point. Last April.

Inflation has been cited as a major cause of the rapidly changing housing market as the Federal Reserve fights to contain record highs for 40 years. Mortgage rates soared in the first quarter of 2022, but homebuyers were reassured when weekly mortgage rates fell slightly in July. According to Freddie Mac’s past mortgage rate charts, the average 30-year mortgage rate as of July 14 was 5.51%.

Adding to the story of the slowdown in the housing market is the Mortgage Bankers Association. Weekly Mortgage Application Survey.. Using the latest data for the week ending July 1, the report shows that the total number of mortgage applications has decreased by 55% compared to the same period last year. However, total mortgage applications have increased by 6% compared to the previous week and almost 3% from the previous month. Refinancing has declined most significantly, down 5.5% in the last four weeks and over 78% last year.

Other important indicators of housing market health include total inventories and listings with price cuts.

A report from the brokerage firm Redfin applies to both of these subjects and provides insights into the slow but steady change from the strong seller market that the country has witnessed in the last 24 months.According to inventory reports, Redfin suggests: Housing supply has increased For the first time in almost 3 years. The number of homes for sale increased by only 2% in June, but the total number of homes sold decreased by 16% year-on-year.

Moreover, since the pandemic began, sales have now fallen more than at any other time. Approximately 15% of pending home sales dropped out of contract in June. Report shows.. The report suggests that a possible explanation for this trend is high mortgage rates. Prolonged contingencies can cause buyers to lose rate locks, which often change their equations.But others Cancel a transaction for any other reasonRethinking a particular home, waiting for a less competitive environment, etc.

Prepare cash when the market bottoms out

The rapidly changing nature of the housing market has led many people, especially Millennials When Gen Z Buyers who feel that home ownership is becoming More and more unavailable.. But for those who had already built a real estate portfolio before the pandemic, the changing marketing conditions are: Big chance For expansion in the coming months.

One real estate investor I talked to an insider in March Two recent refinancings have withdrawn more than $ 1 million in cash and prepared funds in case of major amendments.

“It’s time to get as much money as possible from these assets and make cash available if the market is aggressively modified,” a New Hampshire-based real estate investor told insiders. rice field. “I don’t think it would be a 50% fix because we don’t have the bad loan structure we had in Great.


recession

, But it can be a 10% to 20% drop in price. ”

And as more properties have been on the market for longer, this may also offer an opportunity to add to the unit’s portfolio. The longer a property stays in the market, the more likely it is to become less competitive. And if the seller is eager to get an offer under the contract, they are more likely to negotiate, Suggests another investor insider profiled in June..

“Six months ago, I bought the list for the first day. I was using cash because speed was everything,” California-based veteran investor Michael Zuber told Insider. ..

“After 15 days, the sellers are nervous. They think” no one will show up in my open house, “and they may accept lower offers,” Zuber elaborated. “All markets are slowing at different speeds and speeds.”

It may be a fool’s job to try to time the market, but pay close attention to changes in housing statistics and look at recent selling prices to better see which markets are softening and how much. I understand. However, Zuber suggests that the bargaining power may be moving away from the seller and towards the buyer’s favor for the foreseeable future.

“I think this market downturn will take years, so I’ll make sure all the deals I make are better than before,” he said. “I don’t know where the bottom is.

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