Are We Heading for a Housing Crash?
A recent study from JP Morgan Chase says this about real estate:
"Homebuyers and real-estate experts alike have debated the possibility of a housing crash following the pandemic's unprecedented housing boom. As surging inflation and a series of rate hikes from the Federal Reserve keep mortgage rates elevated, it's an outcome that is becoming increasingly likely. While a steeper decline in home prices may bring about greater volatility in the housing market in the short-term, a new study published by J.P. Morgan suggests it will ultimately lead to greater housing affordability in 2023."
First of all, 2006 to 2009 was a true housing crash fueled by toxic mortgage loans. There is no question that home prices have decreased a fair amount from the lofty levels of the real estate bubble. However, there is still a level of demand present. Yes, higher mortgage rates have definitely slowed things up. The higher real estate prices are not as tolerable, as your future mortgage payment has almost doubled.
Actually, JP Morgan presents the best outcome. It would involve a crash of real estate that would bring affordability back into the marketplace as soon as this year. I would not use the word crash. I would use the word stagnation. We could call it the Great Stagnation of Real Estate, which involves a long orderly decline of real estate prices where the real estate markets limp along until the correct market valuations are agreed upon, and activity starts to pick up again. The challenging aspect of the Great Stagnation is that it could take a number of years before things get back to normal again. So once again, a crash would almost be welcomed.
It goes without saying that having the right Realtor by your side is crucial in tough markets. Realtors earn every bit and more of those commissions!
Bob will be hosting a 50-minute webinar next Wednesday, February 1st, at 12:00 PM CST entitled "2023 and Your Money." Click here to learn more!