Is this the great housing marking deceleration? Will home prices drop? Should I still buy a home with interest rates rising? What about my home value and a recession? There are so many questions right now! Let’s look at a few topics on everyone’s minds.
First of all, recession does not mean a housing crisis. In the last 6 recessions over the past 40 years, housing appreciated in four of the recessions. Home values depreciated in only two of the recessions. One time the decrease was about 2%. Only in 2008 was there a dramatic decrease in home values of about 20%.
Deceleration does not mean depreciation. Home appreciation is expected to continue, projected at about 9% this year and between 3-4% per year over the next four years, which is a more normal appreciation. With the lack of inventory, there is no expectation of the bottom dropping out of the housing market and prices plummeting. We expect home values to continue to increase, but at a slower pace.
Frenzy is slowing
The National Association of Realtors is forecasting the 2nd highest year of home sales. Home sales are about at the pre-pandemic level, which was a normal market. There is still a huge buyer demand, putting upward pressure on prices and home sales. Even though we are seeing an increase in listings, we are still at about half of the amount of listings that we should have. Nationally listings have steadily increased from 326k in January to 541k in May. Locally in Lancaster County listings have increased from 364 units in January to 613 units in May. Showing demand is also still strong, down slightly from the last two years, but still higher than pre-pandemic levels. The frenzy from the last two years is slowing into a more normal market, but it’s still an active market.
Are Homes Still Selling Over List Price with Multiple Offers?
There is a subtle shift in home sales. Homes that need work or are overpriced are not moving quickly. Buyers are getting pickier. They know they have to pay a lot for a home so they want move-in ready. Homes that are “hot properties” are still selling fast – ones that are in great locations and are beautifully done. There have been more price corrections on overpriced homes as well.
The Market is Becoming More Moderate
With the rising interest rates and increase in listings, the housing market craze is adjusting into a more moderate market. Experts are predicting that interest rates will plateau, giving buyers some peace of mind. Remember though that people bought homes with double digit interest rates, still gained equity and appreciation, and still made money on their homes. Home buyers need to adjust their mindset to the more normal interest rates after seeing record low rates the last two years.
Is it still a good time to sell?
Absolutely. We are still in a housing shortage. Buyers are still looking. The better condition your home is, the more money it will sell for. Homes are still selling well. The average days on market for Lancaster County in May was 14 days.
Is it still a good time to buy?
Absolutely. Home ownership is one of the best safeguards against inflation, and is one of the best ways to increase your net worth. Historically home appreciation has outpaced inflation. Even with interest rates rising, home ownership guards against rising housing costs.
Check out my video for graphs showing the latest data!
Data Sources: Keeping Current Matters, Realtor.com, National Association of Realtors