Just months ago, the market was at the peak of what we’ve experienced. Prices were increasing every month and it seemed like you could sell a house within just a few hours of it being listed. Now, some are saying we are in a Housing Recession- at least, in some aspects.
Well, it’s no surprise the market has been going downhill. Buyers simply can’t afford as much house now that interest rates have gone from 3.3% in the beginning of 2022 up to 5.72%. On top of that, inflation prices are also discouraging some from picking up a shiny new mortgage. Because of these things, July was the 6th month in a row where existing home sales have dropped. From June to July alone they dropped 5.9%, or 20.2% from a year prior.
Although clearly there are less transactions happening, more buyers canceling contracts, and less and less new homes being built, home prices have continued to climb, although not as fast as they had been. Prices in July were 10.8% higher than they were last July.
Due to transactions becoming less and less prominent, and fewer new houses being built, many experts are now describing this period as a housing recession. “We’re witnessing a housing recession in terms of declining home sales and home building,” Lawrence Yun, chief economist for the National Association of Realtors, said in a recent report.
“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.”
“Homeowners are in a very comfortable position”
“Prices are still rising in nearly all markets across the country … and inventory is improving slightly, but not greatly so,” Yun stated.
“Homeowners are in a very comfortable position financially, in terms of their housing wealth,” Yun said. He also added that homeowners are “absolutely not” in a recession.
The sale of existing homes did drop 20.2% in July to 4.8 million properties from 6 million a year earlier, according to NAR. Despite this, the median price last month was $403,800, which is 10.8% higher than in July 2021.
Buyers may notice a “more balanced market’
For buyers, this shift in the market is generally good news, experts say.
“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.”
While everything in Real Estate is location based, there’s a much better chance that buyers in most markets will experience more normal transactions. In most places, buyers are taking advantage of this market by negotiating for better terms or contingencies, something that was much more rare a year ago.
“We’re seeing contingencies be accepted and that wasn’t happening,” said Stephen Rinaldi, president and founder of Rinaldi Group, a mortgage broker based near Philadelphia. “We’ll probably see a more balanced market.”
Sellers need to be “realistic”
While home prices have been rising still in many areas, experts warn that sellers need to be aware of the shifting market and price their home accordingly and accept the possibility of spending more days on market than we are used to.
“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.”