Those of us caught in the volatile housing market in 2008 have a legitimate reason to be skeptical of what is happening in the housing market today. But, there is a considerable difference between what happened in 2008 and what is happening in 2022.
Contrary to buyer and seller concerns, we are not in a housing bubble. What is happening now is basic economic principles. Eventually, the market will balance itself out.
Back in 2008, many houses were built, leaving builders with a lot of unsold inventory. Now, in 2022, it is the exact opposite. There is a housing shortage as not enough houses were built to satisfy demand.
Do you remember our economic lesson on Supply and Demand?
When supply is plentiful (as in 2008) and demand is lower than supply, prices are lower.
When supply is limited (as in 2022) and demand is higher than supply, prices are higher.
As mortgage rates increase, buyer affordability decreases. As buyer affordability decreases, fewer buyers will be able to afford homes in the higher price range. Consequently, more homes will be left on the market, unsold, or at the least, sold at a lower price.
Respected economist Lawrence Yun says,
“I expect more pullback in housing demand as mortgage rates take a heavier toll on affordability.”Lawrence Yun, National Association of REALTORS® (NAR) chief economist
Even with higher interest rates, buyer demand remains high. As sellers come out to meet the current buyer market (i.e., adjust home prices), eventually, there will be a market correction. This is much different than a market crash.
The Market Will Balance
As someone who has been in the industry for over 33 years, I have seen a lot of market changes. I don’t see it as an up or down market. I know the market as it relates to buyer advantage or seller advantage. I see real estate purchases as long-term investments. Purchase what you can afford at the time and sell when it is advantageous to you.
Prices go up, and prices go down. It all depends on what is happening in the world. I advise people to keep an eye on the market. When they see a scenario that works to their benefit, for instance, they note that they have a current increase in equity, they should act accordingly, meaning they may want to hold on to the property with the hope of acquiring more equity or sell to reap the gain of their current equity.
I think it is always a good time to be in real estate.
Consumer Affairs Report
Consumer Affairs reports that although the number of available homes have increased, home prices remain relatively high. As the pool of buyers decrease due to decreased buying power, economists foresee the market adjusting as sellers decrease asking prices to capture the attention of available buyers in the market.
Read the full report titled “The Number of Available Homes for Sale Surged in July.” Published 8-10-2022 by Mark Huffman, Consumer Affairs Reporter.