Crush is a big word, especially when you’re talking about real estate, but the current economic climate and the recent financial uncertainty (and rising mortgage rates) make it seem like years of frenzied market volatility. After that, it’s easy to wonder what the housing market will be like. — crash in 2023. Housing Market in 2022.)
We are seeing a lot of changes in the market. Interest rates will stabilize and home prices will fall, but at a slower pace. Inventory is limited as baby boomers stay at home while millennials look to enter the housing market. Markets won’t crash, experts say intention Experience Course Correction in 2023.
For much of 2020 and 2021, housing demand was high and supply low. Interest rates were at historically low levels. Taken together, these factors created a highly competitive seller’s market, with buyers flocking to new listings, making cash offers, and rushing to outbid each other.
Today, prices are still high but stable, interest rates are rising rapidly, and competition is weakening. The National Association of Realtors reports: Home sales plunged in July and August, many show a decrease in demand due to rising mortgage rates. But does that alone lead to crashes?
These factors might make some wonder if we’re headed for another housing crisis like we saw in 2008, but the answer is no. At least not yet!
“It may vary by local market, but a major market crash is unlikely,” he says. Rob CookVice President of Marketing for Discover Home Loans.
Some experts expect demand to pick up soon, especially after the huge rent increases many saw in 2022.
“By spring, people will be reluctant to keep paying this rent, there will be more certainty in the market, and there will be a big boom. [home] say sales Suzanne Millera real estate and housing expert in New York City.
Even so, an increase in demand may not match an increase in supply.
“In the near future, we will see a significant drop in the number of trade-up buyers,” he says. Ralph Lehard, owner of Real Property Management Richmond Metro. Trade-up buyers are current homeowners looking to purchase a larger or better property. As these homeowners move into her second (or third or higher) property, they are releasing smaller and often more affordable homes for first-time buyers. Fewer active trade-up buyers could mean fewer entry-level homes on the market, which means fewer options for new buyers.
However, as with most things, the current situation is not the only one. To understand the projected range of possible crashes in the near future, it’s important to look back over the past two years, especially in relation to the pandemic.
Before the pandemic, the housing market was doing well.
“People were buying and things were almost on fire,” says Miller.
When the pandemic and accompanying lockdowns hit, people felt trapped and realized they needed more space.
“Remote work has made people’s homes more important and they need more space,” says Miller.
Many city-dwellers go to the suburbs for bigger homes, eventually taking advantage of the sudden drop in rent after many properties have been on the rental market for weeks or months. Some have moved into their previous spaces.
“As soon as the pandemic subsided, people returned to urban areas,” says Miller. “They wanted to get back into action. They wanted to be lonely and go to a bigger city.”
As a result, in New York City and other expensive neighborhoods, today’s market is rapidly becoming more competitive, resulting in higher interest rates and prices.However Similar trends can be seen in other parts of the countrylow inventory and high demand have led to the high housing prices we see in these areas today. means that a broader crash is unlikely.
So will the market crash?
Probably not.think again fix, No crash.
Leahard believes higher interest rates could delay or prevent a market crash by keeping demand low for current homeowners. Current homeowners, who may need more space, are not yet keen to sell because interest rates are rising, he says.
“Home prices may rise by $100,000, but if you’re trading at the roughly 3.5% rate you locked pre-Corona, your mortgage payments could double. [for one that’s] 6.5 percent,” he says. “People are looking at it and saying, ‘We want more space, but we don’t want to give up this rate. ”
Average home prices have risen dramatically over the past three years, but Miller believes those prices won’t plummet, but they will fall again.
“I definitely think the market will be flat, and it’s already up quite a bit,” she says. “It’s been up 30% to 40%. So even with the 20% adjustment, she’s still up 20%.”
If a home has been on the market for a long time these days, it’s not necessarily a sign of a crash. It may simply be a pricing issue.
“Homes are just on the market because sellers are reluctant to negotiate,” says Miller. “Whenever the seller is priced realistically, it sells.”
Even with higher interest rates, Miller says there are still cash and international buyers willing to pay top dollar and not have to worry about interest rate changes.
“If you look at the statistics for the last 50 years, according to Freddie Mac, the average interest rate was 7%. The market in the late ’80s I remember was 18%,” says Miller. “So, even with the sticker shock from last year, I don’t think it’s going to deter the market too much. There’s a correction. I don’t think there will be a crash.”
Miller expects these adjustments to be in place by the end of the year, but believes the market will recover in the spring. Home sales typically slow in the winter monthsI would expect a slowdown anyway.
Whether the market crashes or not, there will definitely be a change next year.
Chris Masiero, Better Homes and Gardens Real Estate CEO Masiello Group believes lower adjustable rate mortgages in the 3.75-5% range will bring buyers back to the market. Adjustable rate mortgages (ARMs) change with the market unlike fixed rate mortgages. But it’s usually cheaper to go with ARM than fixed rate (at least initially).
Many believe that fixed-rate mortgage rates will also plateau.
“Most economists predict that interest rates will be flat and may decline slightly next year,” Cook says. “However, this year has taught us all that interest rate forecasts are only as accurate as the next inflation report. We are raising interest rates in hopes of keeping them in check, which has had a modest effect so far, but it remains to be seen whether inflation has been fully contained.”
Interest rates can be purchased if you are looking to buy. Cook recommends using a calculator like Discover. affordable calculator See how much home you can buy at various rates.
And if you want to balance the additional long-term costs of rising mortgage rates, there are ways to offset it.
“I’m ready to pay a bigger down payment. This is one way to offset the weight of rising interest rates by bringing more cash to the table,” says Rehard.
Whatever you do, don’t panic. Less demand, longer time on the market, and higher interest rates aren’t the worst-case scenarios.
“When people stop buying and selling and trading and lower mortgage rates until market volatility subsides, I don’t see a big problem there,” says Reahard.