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A message from our Newsletter Sponsor, Realtor Andrea Chirich:
Is the real estate market a bubble about to burst? Are we headed for a crash? These questions are on many people’s minds! I am happy to calm fears and share the reasons today’s real estate market is a different market than the one that crashed starting in 2006. The situations that caused the housing bubble and resulting crash are not present in our current real estate market. We are moving towards a more historically normal real estate market, and a balanced market which is good for both Buyers and Sellers.
The 2006 real estate market found many homeowners “upside down” in valuation; owing more on the home than the home was worth. When the economy took a downturn, if affording the mortgage was a problem, selling the home was not a solution as homeowners owed more than the market value of the home. This gave homeowners little or sometimes no equity. Buyer demand was very low, and homes flooded the market. Foreclosures and short sales were the remedy.
Today, the lending industry continues to be cautious with loan approvals and mortgage products. Most homeowners have equity in their homes thanks to the robust home value appreciations over the last few years. Average home equity has topped $300,000.00. Homeowners can take out equity lines or sell their homes and take the equity.
Buyer demand continues to exceed the available inventory. Even with the rise in interest rates there remain more buyers wanting to purchase a home than available inventory. The rise in interest rates have caused some buyers to drop out of their home search, while others may have adjusted their price point downward to accommodate the higher cost of borrowing, but the continued buyer demand will keep homes selling.
For these reasons expert analysis does not point towards a housing bubble or a crash. Homeowners have equity in their homes and homes are expected to continue to appreciate. For 2022, even with the rise in interest rates softening prices, the national average for home appreciation was 10%. Going forward the anticipated home appreciation is single digit growth instead of double digit, but appreciation of home values remains the expectation.
Increases in interest rates, and the resulting impact on mortgage payments have created a shift. For Sellers, homes must be priced correctly and may take longer to sell. Today, the average days on market for a home is 47 days, compared to 4 days during our overheated market. Now, Home Sellers may receive one offer as opposed to multiple offers. Buyers that are looking right now are well qualified and motivated to purchase. There is less competition from other buyers which affords buyers the luxury of looking at a potential home two or three times before making an offer. Buyers can make an offer and negotiate as opposed to throwing as much extra money as possible over list price, waiving appraisal gaps and inspections in the hope their offer wins.
The real estate market is often characterized as “balanced” between a Buyer and Seller market when there is a 6-month inventory of available homes. Today’s inventory is only 3 months. Instead of a bubble we are in a more normalized market that brings benefits for both buyers and sellers. Instead of the feeding frenzy of the prior couple of years, it is approaching a balanced market where sellers can get a good price for a well-priced and well-prepared home, and buyers have an inventory of homes to consider.
Are you considering buying or selling? Or curious about your personal real estate situation? Please feel free to reach out to me with your questions. I am happy to be a resource for all things real estate!
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