Experts Check In
The spring real estate market is heating up. With spring in full swing, let’s check in some industry leaders, to see what they have to say about buying and selling this spring, and what it means for you. Selma Hepp, Chief Economist, CoreLogic: “We see more competition among buyers . . . Housing supply also tends to grow during the spring months. And this is also the time of year when relatively more migration happens, as people graduate and move elsewhere looking for jobs.” With the school year coming to a close, graduates will be moving out and looking for their own spaces, while families might be looking to downsize from an empty nest. This time of year usually sees an uptick in both sales and rentals for this reason. Greg McBride, Chief Financial Analyst, Bankrate: “I don’t expect big moves in prices in the span of a month, but like the flower buds of spring, the housing market is showing signs of improvement. A pick up in activity with inventory still low does bode well for home prices.” If you’re looking to sell, now is a perfect time, because most of the spring houses haven’t made it to market yet, so you’ll still be able to get top dollar for your property. Rick Sharga, Founder and CEO, CJ Patrick Company: “If you can find a home you love and can afford at today’s prices, don’t wait. Home prices in most of the country are unlikely to crash, and mortgage rates will only come down very gradually if they decline at all this year.” While the Bank of Canada holds its interest rate, now is a great time to lock into a low mortgage rate. Banks and lenders tend to get competitive in the spring, offering promotions and better mortgage rates as the market warms up. Jeff Tucker, Senior Economist, Zillow: “The market is still much friendlier this spring for buyers who can overcome affordability hurdles, but buyers are going to see more competition than they might expect because there are not many homes on the market to go around. New listings are increasing, which they almost always do this time of year, but not nearly as quickly as usual.” There don’t seem to be as many homes headed for the market as the year goes on, so if you see something that you like now, it’s best to jump on it, because something similar may not come up this year. BOTTOM LINE Spring into action today! If you’re looking to make a change in your housing, if you’re looking for a new lease on life, if you’re looking for a new home or want to sell your old one, reach out to your trusted real estate professional, and let’s connect to get you started on your real estate journey before the spring market even reaches its hottest.
Stuck in a Sellers' Market
The last few years have seen a great deal of volatility in the housing market. Buyers scrambled in the pandemic, mortgage rates spiked, and home prices peaked last summer. So why haven’t prices crashed back down? Sellers have been able to keep prices fairly stable over the last several months because there is less competition. With fewer houses on the market, there’s less seller incentive to lower prices. According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), low inventory is limiting just how low prices will go: “We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.” As the graph below shows, the number of available homes has been steadily decreasing for years, with new record lows consistently being broken: That lack of available homes on the market is putting upward pressure on prices. Bankrate puts it like this: “This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.” If more homes don’t come to the market, a lack of supply will keep prices from crashing, and, according to industry expert Rick Sharga, inventory isn’t likely to rise significantly this year: “I believe that we’re likely to see low inventory continue to vex the housing market throughout 2023.” The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still astonishingly low. Today, we have a 2.6-month supply of homes at the current sales pace. Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (see graph below): So what does a sellers’ market mean for buyers? It means fewer homes on the market, so if you see something you like, it’s best not to wait because another one like it may not come up again. It also means increased competition, with multiple offers being made on practically every property. If you want to be a competitive buyer, find a trusted real estate professional who knows the tricks and trends of your local market, so you can win the offer the first time you make one. As for sellers in a sellers’ market, this is the ideal time to list your property, because you’re going to get the best price on your terms, and the likelihood of your house sitting on the market for too long is much lower than in a buyers’ market. If you’re looking to sell quickly and for top dollar, reach out to your local real estate agent today, and take advantage of the spring real estate boom.
What Past Recessions Tell Us About the Housing Market
The economy is constantly shifting, and even if you're not one to closely follow its every move, you've likely caught wind of the ominous whispers of an impending recession. The causes of economic turmoil are many and varied. Still, by turning to the wisdom of those who have studied the markets for years and examining past patterns, we may catch a glimpse of the turbulent future that awaits us. As Greg McBride, Chief Financial Analyst at Bankrate, says: “Two-in-three economists are forecasting a recession in 2023 . . .” With the spectre of a recession looming on the horizon, it's natural to wonder what impact it might have on the housing market. But history has shown us that there's no need to fear. By examining the data from past recessions, we can see how the real estate market has weathered economic turmoil. This historical perspective can put your mind at ease and give you a better understanding of what to expect in the event of a recession today. A RECESSION DOESN’T MEAN FALLING HOME PRICES To show that home prices don't fall every time there's a recession; it helps to turn to historical data. As the graph below illustrates, looking at recessions going back to 1980, home prices appreciated in four of the last six. So historically, it doesn't mean home values will always fall when the economy slows down. When the topic of a potential recession arises, many people immediately think back to the housing crisis of 2008. It's easy to assume that history will repeat itself and that the housing market is once again on the brink of collapse. However, this is different. The market fundamentals of today are vastly different from those in 2008, and experts predict that a recession is unlikely to have the same devastating effect on the housing market. While home prices may fluctuate in different local markets, experts predict that prices will remain relatively stable nationwide and not fall as they did in 2008. The average of their 2023 forecasts shows that prices will net neutral. This means that a recession will not likely cause a crash in the housing market as it did in 2008. A RECESSION MEANS FALLING MORTGAGE RATES Research also helps paint the picture of how a recession could impact the cost of financing a home. As the graph below shows, historically, mortgage rates decreased each time the economy slowed down. Fortune explains mortgage rates typically fall during an economic slowdown: “Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.” As we move into 2023, market experts predict that mortgage rates will likely stabilize at lower levels than last year. This is because mortgage rates tend to be closely tied to inflation. And early indicators suggest that inflation is beginning to cool off. Should this trend continue, rates may even drop a bit further. However, it's unlikely that we'll see rates as low as 3% again. It's important to remember that there's no need to be fearful regarding the housing market and a potential recession. While a recession may occur, it's likely to be mild, and the housing market will play a vital role in a quick economic rebound. Overall, you can expect a stable market and home prices to be net neutral in the coming years. As the 2022 CEO Outlook from KPMG, says: “Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . . More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.” Bottom Line Though past events don't always dictate future outcomes, studying history can still help us gain valuable insights. Looking at historical data, home values have generally appreciated during most recessions, and mortgage rates have dropped. The housing market is a complex and ever-changing landscape, and if you're considering a purchase or sale this year, expert advice is essential. Need help navigating this rough terrain - connect with me to arm yourself with the knowledge you need to make the most of your homeownership goals in these uncertain times.
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