That’s Right…Things Are Looking Up
(Even if you’re skeptical)
Over the past year or so, we’ve grown accustomed to viewing the real estate market with fear and trepidation. The market indicators and media have cast a bright light on rising interest rates and a precariously volatile economic forecast. After all, 6% mortgage rates have become the new normal. Who would have thought that 12-16 months ago? But before we resign ourselves to the pending doom and gloom, let’s actually consider three key factors that, dare I say it, point to a more positive future…and present day, as well.
Good News Tidbit #1
Despite affordability issues, home prices have increased. Yes, you read that right. This rise, even amidst affordability challenges, suggests a strong demand for real estate, which is beneficial for sellers as it can drive up prices.
Good News Tidbit #2
There’s speculation about the stabilization of home value declines. This, coupled with the strong initial home price growth indicated by Case-Shiller, FHFA, and CoreLogic, shows a potential rebound. Furthermore, Black Knight data reveals that home prices, which were declining in most major US markets, are now on the rise.
“Just five months ago, prices were declining on a seasonally adjusted month-over-month basis in 92% of all U.S. markets. Fast forward to March, and the situation has done a literal 180, with prices now rising in 92% of markets from February.”
~ Andy Walden, VP of Enterprise Research, Black Knight
M-O-M % Change in Home Values
Good News Tidbit #3
Initial forecasts of a 4% value loss in homes may be revised to only a 1% loss or possibly a flat or even a positive year. This would bring relief to homeowners, as it reduces the risk of loss on their investment.
Fannie Mae’s % Change in Home Values in 2023
Cautious Optimism (Emphasis on “Cautious”)
Before we paint too rosy of a picture for the real estate market, there are, of course, some challenges we face entering the summer months. Inventory, or lack thereof, is a concern. The nearly nationwide shortage could put pressure on buyers due to a lack of choices and the resultant higher prices. However, this bodes well for sellers, who can set aside depreciation concerns. As we have said in recent issues, now is no time to live under a rock if you’re a potential buyer. Stay in touch with your Realtor and banker at least once a week. Make sure you have the latest reliable information in order to make an informed decision.
What About the Economy?
This is the million-dollar question. Everyone has an opinion, but no one knows for sure exactly what will happen with the economy—both in the short term and the long term. The Federal Reserve has hinted about a possible recession and that could trigger a market reset. At least, that’s the fear. And while a recession is generally viewed negatively, it could actually present opportunities, such as lower prices for buyers and a chance to secure desirable properties that would otherwise be out of reach. So, the moral is…watch what the market is doing and take the opportunities the market provides. And that applies to both buyers and sellers.
Breaking It All Down
The takeaways are thus: those considering buying real estate should be prepared for higher prices due to strong demand and inventory shortage. However, be vigilant about potential opportunities if a recession occurs, that is the great equalizer for buyers. Sellers, on the other hand, can be somewhat reassured by the strong demand and rising home values. But just like buyers, be ready to pivot and adjust if the economy goes south.