The current state of the housing market has led many to speculate about a potential crash similar to the one experienced in 2008. However, despite several shifts in the market, such a crash has yet to occur. This blog explores the reasons why this may be the case and why waiting for a major drop in prices may not be advisable.
While house prices have dropped in some areas, the national average has remained relatively flat in the last six months. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), this trend is unlikely to change significantly. However, motivated sellers who need to sell quickly are likelier to lower their asking prices. Most sellers, however, are only willing to budge a little on prices, primarily because of low inventory levels, if at all. Yun explains that the supply shortage limits sellers’; willingness to drop their asking prices.
The limited supply of homes on the market creates upward pressure on prices, forcing buyers in certain markets to bid up prices. This dynamic makes a price crash improbable this time around, as the supply-and-demand equation would not allow for it. Although some markets may experience price declines, Yun notes that a repeat of the 30 percent price decline witnessed in 2008 is highly unlikely. In addition, after an extended 2+ year frenzy of unprecedented appreciation, a slight giveback in values as interest rates rose and the country battled inflation is neither unexpected nor a harbinger of a “crash.” In fact, as of this writing, we are seeing the housing market already showing appreciation in many major markets in 2023.
One of the main reasons sellers are not under pressure to move is that they have substantial equity. This cushion helps to minimize the chances of distressed home sales, such as foreclosures and short sales. Moreover, many homeowners have locked in low mortgage rates, meaning the equity cushion will likely be around for some time.
In conclusion, the limited supply of homes on the market means that working with a trusted mortgage professional and real estate agent who understands your local area and current market volatility is essential. There may be a better strategy than waiting for a significant drop in prices, given the current dynamics of the market.
Working with a Certified Mortgage Advisor means you will hear about solutions you may have been unaware of. If you are on the fence still about renting vs. buying, give me a call, and I will be happy to answer your questions. Contact me today.
