While it’s true that home values have experienced a minor decrease compared to 2022, I assure them this does not indicate a crash. Rather, it suggests that the housing market ebbs and flows. I believe it is currently allowing for stabilization in the real estate market due to higher interest rates, home prices rising more quickly than incomes and lower than normal inventory.
Here are three reasons why the housing market is showing resilience:
Low inventory. Today’s typical homeowner has substantial home equity and a fixed-rate mortgage locked in at a rate well below 5%. A recent study by Redfin reveals that a remarkable 82.4 percent of current homeowners have mortgage rates below 5%. Therefore, most sellers stay put unless they are forced to sell. The persistent shortage of available properties is the primary reason why buyers are compelled to drive prices. Moreover, this scarcity strongly suggests that the current supply-and-demand dynamics make a price crash in the near future highly unlikely.
Changing demographic patterns. New demographics are giving rise to a fresh wave of potential homebuyers. Amidst the pandemic, numerous existing homeowners in the United States recognized the need for large living spaces, particularly with the surge in remote work. Many Boomers and Millennials have entered the market as well.
Stringent lending standards. Lenders require borrowers to have strong credit, employment and income to qualify for a mortgage. This was not the case during the last housing crash. Due to the strength of borrowers, the market is not currently overly impacted by foreclosures or short sales, which is a good indication the housing market remains strong.
It is important to note that the housing market is always subject to various external factors, including economic conditions, government policies and unforeseen events. Vigilance and ongoing analysis of market trends will be crucial to ensuring the continued stability and resilience of the housing market. Nonetheless, the current financial strength of homeowners offers assurance that any potential price declines will be manageable, maintaining a favorable outlook for the housing market in the foreseeable future.
I can tell you without hesitancy there is no substitute for local market knowledge. If you’d like to discuss the sale or purchase of a home, call me at 925-567-6170.
Jennifer Stojanovich is an owner/broker with Better Homes Real Estate. Please send your questions and comments to firstname.lastname@example.org