As economic uncertainty increases around the world, many are beginning to wonder: “Is the real estate market going to crash?” Lafayette Realtor
Here is a quote from Goldman Sachs:
“There are strong signs that the surge in housing sales and prices during the pandemic has come to an end. Goldman Sachs Research expects growth in advanced economies to slow in coming quarters and the recent housing trends only reinforce that expectation. And while a tight housing market may be enough to avoid a slump, the rapid deterioration in affordability and large drops in home sales suggest that a housing downturn is a real risk.”
Consider the following:
- In July, sales of new single-family homes dropped to a 6 ½ year low. This was partly due to higher mortgage rates and housing prices that made housing less affordable.
- In July, new home sales dropped 12.6% to a seasonally adjusted average of 511,000 units. This was the lowest level since 2016.
Currently, there are 1.3 million previously owned homes on the market. It is estimated to take 3.3 months to reduce this inventory, up slightly from the 2.6 months it would take 12 months ago.
In spite of higher interest rates and sales dropping, there are still interested buyers looking for homes:
- Nearly 1/4 of all home sales are made in cash. In June, 25% were made in cash, while 24% cash transactions in July. In July 2021, 24% of homes were sold in cash.
- While home prices are coming down, they are still more expensive than a year ago: the average home price in 2022 is $428,700, while in 2021 it was $346,900.
California Trends
In California, housing affordability hit a 15-year low, partly due to rising mortgage rates and record-high home prices ($883,370). In July 2021 the average price of homes in California was $811,170.
As of July 2022, California was still considered a seller’s market, with homes selling in 14 days, six days less than in July 2021.
Here’s an infographic from the California Association of Realtors:
Will The Real Estate Market Crash?
While many people are predicting a real estate market crash, a realtor.com survey finds others are more optimistic. Their survey was conducted online within the United States from Aug. 9-12. Adults who sold their home within the last 12 months took part in the survey:
“The days of frenzied sales with waived inspections might be behind us, as buyers regain a bit of bargaining power. According to a new Realtor.com survey, 92% of people who sold their home within the last year accepted some buyer-friendly terms and 41% accepted some contingencies in the contract.
“Additionally, among those surveyed, the number of buyers asking for repairs based on the inspection results more than doubled in recent months, and the number of sellers refusing to make repairs dropped to zero. Whether it be financing, timing, repairs or flexibility, the art of negotiation is returning to the housing market.”
Homes are still selling at a brisk pace, with 22% of people who sold homes within the past 30 days reporting their home went under contract in less than a week. This is up from 14% when compared to sales 6-12 months ago. In addition, 92% of those who sold their home within the past month said they were happy with the outcome of their home sale.
Lafayette Realtor’s Summary
Current economic trends have caused many to express concern about the real estate market. After federal data showed sales of new single-family homes hit their lowest level in over 6 years, Ian Shepherdson, a chief economist at Pantheon Macroeconomics, provided a bearish outlook for homeowners:
“The housing market is in much worse shape than the Fed has been willing to admit,” Shepherdson said in a note to clients. “But policymakers have made it clear that inflation is their primary objective, and housing is collateral damage.”
As the Fed continues to raise interest rates to tame inflation, we can expect to see more uncertainty in both the real estate market and the overall economy.
About Range Homes
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