Homebuyers anticipating a collapse in the housing market continue to receive negative news. Mortgage rates have increased due to rising interest rates not seen in a generation. However, that has led to an intriguing shift toward a buyer’s market. According to a poll by the National Association of Home Builders and Wells Fargo, homebuilders estimate that the sluggish housing market will only improve in 2024. Considering the decline during the 2020 pandemic, it’s the lowest level the NAHB has witnessed since 2012. According to the NAR, October was the ninth consecutive month sales prices declined in the United States. Since the collapse of the subprime mortgage industry in mid-2012, this downturn has been the worst. If mortgage rates and property prices are considered, 2023 may be the ideal year to enter the housing market. Here is why; Prices are declining in expensive cities. Prices are still falling, notably in more costly areas, in 98 of 148 key regional housing markets, or two-thirds of all housing markets. Pricey markets may continue to decline, so now is a great time to invest in one. Even a few months ago, I wouldn’t have considered this prospect. It’s challenging to forecast whether this will occur. And if so, the federal interest rate increases coming in the upcoming months will offset the lowering of prices. Waiting until the most recent rate hike’s effects is the only way to be sure. Remember that the ideal time to buy is at low prices, just like any investment. Owners are not in a desperate situation. Suppose the pandemic forced millions of homeowners to default on their mortgages. In that case, it might have had disastrous effects on the housing market. Fortunately, mortgage forbearance programs allowed insolvent homeowners to postpone payments while they regained their financial footing. It was successful since by the end of June, the proportion of mortgage amounts that were 90 days or more past due stayed at 0.5%, a record low. Additionally, the rate was much lower in the first quarter of 2022 compared to 2010, when it reached a 30-year high of 11.36% for single-family home delinquencies. 2.7% of all outstanding debt, or $435 billion, was in some default as of June. Although it may seem like a lot, there has been a two-point reduction from pre-pandemic levels. Additionally, rising home prices have resulted in homeowners having more equity. According to Black Knight, a provider of mortgage technology and data, even though home prices have started to fall, mortgage holders still had access to nearly $11.5 trillion in tappable equity at the end of September, with home values in the country’s 50 largest markets still higher than they were at the beginning of the pandemic by 19% to 66%. In 2008, there was an oversupply, but now there is a shortage. Take heart if you’re worried about a repetition of the 2008 financial crisis that shook American banks. Many homeowners escaped the pandemic’s economic perils with little damage. Mortgage lenders created programs to halt payments as some owners teetered on loan default. Mortgage balances reached historic lows, with 90 days past due loans valued at just 0.5%. That significantly decreased from 11.36% in 2010 when Americans had financial difficulties. According to the Harvard Business Review, if home values rise across much of the United States, homeowners will benefit from higher equity, improving their financial status. Compare that to 2008, when the housing meltdown and oversupply devastated home prices and forced at least one homeowner in Detroit to sell for only $1. According to Jerry Konter, chairman of the NAHB, “high mortgage rates reaching 7% have considerably reduced demand.” “This is an unhealthy and unsustainable arrangement.” And for this reason, prices in 2022 may be the lowest you see in a while.
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Bio:
Mack Hales has spent the past 4 decades helping clients prepare for retirement and manage their finances successfully. He also works with strategies that help clients put away much more money for their retirement than they could in an IRA or even a 401k. We involve the client’s CPA and/or their tax attorney to be sure the programs meet the proper tax codes.Mack works with Federal Employees to help them establish the right path before and after retirement. The goal is to help the client retire worry-free with as much tax-free income as possible and no worries about money at risk of market loss during retirement.•Mack has resided in Gainesville, GA since 1983, so this is considered home. Mack is married to his wife of 51 years, has two boys and five grandchildren.
