If you’ve been listening to the news lately, you may be thinking that you’ve missed your opportunity to sell your home quickly, for top dollar. It’s true that home mortgage interest rates have risen somewhat and that the buyer frenzy that caused homes to sell within hours of hitting the market has abated somewhat. However, that doesn’t mean that it’s still not a seller’s market in most parts of the country. Most economists agree that a real estate bust, similar to that of 2008, is extremely unlikely. The market conditions are just too different today compared to then.
Is the real estate boom over?
The number of home sales fell 8.6 percent from May 2021 to May 2022, according to the National Association of Realtors. Mortgage rates have doubled since August 2021. This might lead you to think that the real estate boom is over. However, on the positive side, home values continue to soar and show no signs of abating. The average home value in the United States was $407,600 in May 2022. One of the hottest markets in the country over the last year was Ogden, Utah, where home values increased by 30.8 percent. Demand for homes, but new and existing, continues to be strong.
With such high home values, it’s difficult to make a case for a real estate market crash. Many economists believe that the real estate market may slow down slightly, but that predictions of a crash are overstated. According to National Association of Realtors Chief Economist Lawrence Yun, no crash is imminent. He believes there’s too much of an imbalance between supply and demand for home values to crater. Said Yun in late June, “I would not be surprised if some markets do see some minor price declines.”
Reasons why there isn’t likely to be a housing crash include…
- Low home inventory rates. Demand for homes is what’s driving up the prices. According to the National Association of Realtors, there was just a two-month supply of homes on the market in February. That’s down from a 2.4-month supply in September 2021.
- Demographic trends are driving sales in many markets. Strong demand from millennials and from Hispanics is helping to drive demand.
- Home builders can’t build new homes fast enough. Demand still far outpaces the supply of new homes, the inverse of what happened in the run-up to the crash of 2008. Home builders continue to be hampered by building supply delays and labor shortages.
- Low foreclosure rates. Even though home values are high, most homeowners still have a comfortable equity cushion in their homes.
- Strict lending standards. One of the things that led to the housing market crash of 2008 was too lenient lending standards. That isn’t the case today. The typical credit score for mortgage borrowers in the third and fourth quarters of 2021 stood at a record high of 786, according to the Federal Reserve Bank of New York.
What about the economy?
Reports of a crash of the US economy are vastly premature. Yes, inflation is hovering at 9.1 percent as of June 2021, the highest level since November 1981. This has caused the Federal Reserve Bank to increase the prime lending rate, which affects mortgage lending rates. However, the stock market indexes are strong. The US unemployment rate is at 3.5 percent, which is near a historic low and consumers continue to spend.
What’s this mean for home sellers?
Home sellers still have reason to be cautiously optimistic. While it may take a little longer to sell your home, and you may not see the bidding war that you might have seen a year ago, there is still strong demand for homes. Even though mortgage rates have increased, the economy is still strong, and buyers have the money to support those loans. With unemployment so low and consumer sentiment high, there are still buyers out there looking for a new home.
Are you thinking about selling your Lake Oconee or Lake Sinclair home? We can help. To learn more about buying (and selling) property in this unique, scenic area, contact Kim and Lin Logan Real Estate. We are the top real estate company in the Lake Oconee/Lake Sinclair area.