The future of our market is uncertain, but prices likely won’t fall.

Are you worried about the future of our housing market? You aren’t alone—many clients have reached out to ask me questions about where our market is heading. The truth is that no one knows for sure, but by looking at the latest statistics and trends, we can get a pretty good idea of what the future holds. Today I want to talk about where our real estate market is heading and what it means for you. 

So are we heading for a crash, a correction, or something else? First, none of the experts believe we’re heading for a crash, but I’ll talk more about that later. For a correction to occur, we would need to see a 10% decline in home values, according to Investopedia. Almost no markets around the country are experiencing that sort of decline, so we aren’t in a correction either. 

The best way to describe our current market is that we’re at a turning point. No one knows what will happen for sure because we’ve never seen a housing market like this before. We’re coming out of an unprecedented pandemic; inflation is high, supply is low, and demand remains high. Although no one knows what comes next, it looks like sellers will continue to have the upper hand, at least in most markets. 

“No experts believe we’re in a housing bubble or heading for a crash. ”

If you’ve heard on the news that our housing market is correcting, we’re in a housing bubble, or the market is about to collapse, don’t worry. If you check out the chart at 2:11 in the video, you’ll see that the average mortgage rate moves mostly in unison with the 10-year treasury yield. This means that when the Federal Reserve raises rates, it doesn’t have a direct impact on your mortgage interest rate.

As I said earlier, no experts believe we’re in a housing bubble or heading for a crash. Despite rising mortgage rates, we still have an extreme shortage of homes. Millennial buyers are still entering the market in large numbers, so demand will remain high even as rates rise. Mortgage rates will likely level off after the initial shock, and many buyers will reenter the market if this occurs. 

What about a recession? You may have heard in the news that the wider economy is heading for a recession, and that is probably true. However, a recession doesn’t mean housing prices will drop. If you look at the chart at 4:23, you’ll see that housing prices actually increased in four out of the last six recessions. The only significant outlier is the 2008 crash; however, our current market is very different from that one. The bottom line is that while a recession may be coming, our housing market will likely remain strong. 

If you have questions about today’s topic or anything else, please call or email me. I look forward to hearing from you!