The housing market was still in overdrive a few months ago due to rising property prices, historically low mortgage rates, and unceasing demand. Data, however, now persuades some industry professionals that the market is experiencing a “housing recession.”
For instance, existing house sales decreased in July by 5.9% from June, marking the sixth consecutive month of declines, and by more than 20% from a year earlier. In addition, the industry has seen layoffs and weaker job growth, homebuilder confidence has fallen, and purchasers are canceling contracts in response to rising interest rates that have risen to 5.72% from below 3.3% heading into 2022.
“We’re witnessing a housing recession in terms of declining home sales and home building,” according to a recent research by Lawrence Yun, chief economist for the National Association of Realtors.
But for homeowners, buyers, and sellers right now, it’s a different story.
“It’s not a recession in home prices,” Yun added. “Inventory remains tight and prices continue to rise nationally with nearly 40% of homes still commanding the full list price.”
However, there are indications that the market is beginning to move in favor of buyers.
“Prices are still rising in nearly all markets across the country … and inventory is improving slightly, but not greatly so,” Yun told.
“Homeowners are in a very comfortable position financially, in terms of their housing wealth,” Yun said. Moreover, he recently asserted that homeowners are “absolutely not” experiencing a recession.
According to the NAR, existing home sales decreased by 20.2% in July from 6 million to 4.8 million houses. However, the median price increased 10.8% from July 2021 to $403,800 last month.
Buyers have experienced greater difficulty getting loans or being able to afford higher rates as interest rates have approximately doubled from where they were six months ago.
“I am seeing homebuyers cancel a contract if their payment is just a little bit higher than what they expected — I’m talking about $100,” Al Bingham, a Sandy, Utah-based mortgage loan officer for Momentum Loans, said. “Homebuyers are very cautious right now.”
A “more balanced market” can be encountered by buyers
The decline in demand is often a positive development for buyers, according to analysts.
“Buyers should expect a little better price negotiation possibility,” Yun said. “Last year, they were at the mercy of whatever sellers were asking … and there were multiple offers. Buyers may not face that now.”
Although it depends on the particular market, there is a greater likelihood that purchasers will have more typical purchasing experiences. In other areas, the slowdown implies reduced competition, which increases the probability that sellers will accept bids with conditions attached, like the buyer having to first sell their own house.
“We’re seeing contingencies be accepted and that wasn’t happening,” the president and founder of the mortgage broker Rinaldi Group, situated close to Philadelphia, Stephen Rinaldi, stated. “We’ll probably see a more balanced market.”
The requirement for sellers to be realistic
Sellers, on the other hand, might want to lower their hopes.
“Sellers need to be realistic about the changing market,” Yun said. “They cannot expect to simply list their home at a high price and easily find a buyer.”
“Too many buyers chasing after too few properties — those days are over,” he said.
Homes continue to sell quickly at the same time. According to the Realtors organization, houses typically stayed on the market for 14 days in July, which is a decrease from 17 days a year earlier.