Where is the Crash?
This is the question that buyers have been asking for months now: When will the housing market crash? Many are waiting for a 2008-style crash with runaway mortgages, excessive amounts of inventory, and a torrential onslaught of foreclosures hitting the market. The fact of the matter is that we are currently experiencing a normal housing crash. We are in the third year of record low mortgage demand numbers, have only 2.5 months of inventory, and prices are staying steady or dropping, albeit slightly, during the selling season. Real estate moves slowly; think of it as a tide that rolls in and out of the beaches. You don’t notice that it’s happening unless you compare it to where the water was hours ago. Stock prices are fast; they are the rogue waves in the middle of the ocean.
We are finally experiencing the effects of Covid policies on the market. With the Fed lending money at near 0% interest, the boom experienced has made people who were slightly behind the bell curve feel left behind. Those who refinanced or bought when rates were at 2% are not moving at the normal 15% turnover rate experienced in Spokane, often citing that the rate on a larger home does not yet make financial sense for them to move. This means that the turnover rate in moving has dropped closer to 6% - 7%, or about half of what we normally see going on the market.
But wait, if this is a crash, what does that mean for me?
That all depends on your situation. If you are currently in a home with a mortgage rate under 5% and there are no extenuating circumstances to move, then it is in your best interest to stay put and wait out the storm. We expect that as the rate drops slowly over the next 2-3 years, buyers will become accustomed to the new norm of 6-7% rates, and as that rate drops closer to the magic 5% range, home prices could increase by as much as 25%.
If you need to sell right now, then there are a few things that matter A LOT. Ensuring that your home stands out in a market with very few buyers is key. Make sure you hire a realtor who is keeping up with the trends in today’s market and has a strategy that matches those trends. Fix those small things that you have been ignoring. There is a lot of pressure on buyers who are trying to come up with the funds to purchase, and they very rarely have any time or money to put into the home after it has sold. That means if you have a light that flickers, replace it so they don’t think there is a larger electrical issue. Paint your home in neutral colors, replace carpets that are stained, and invest in portable A/C units to keep your home cool during the hot summer months. Buyers have a good nose to sniff out little problems and don’t feel the pressure to put offers on homes quickly like they did in 2021 and 2022. Pricing your home appropriately is key to trying to get multiple offers right now. Gone are the days of picking a dream price and getting a cash offer by noon.
If you are buying, right now may not feel like the best time to jump into the market. But if you are able to weather the storm while rates normalize over the next 2-3 years, you should see dividends pay when the housing market corrects. This can either be in refinancing and lowering your payment and accessing equity, or just in the price that you will be able to ask for your home in the next couple of years. Often when people say it’s the worst time to buy, that is the best time to make smart money decisions that will pay off later on. This is because you will not be competing with late-stage millennials and early Gen Z’ers to purchase during the next major run on homes. You will be the one who holds the chips during the buying and selling process. Even if it’s not as easy as it was just a few years ago, time in market is the best way to ensure you don’t miss opportunities.
In any case, there is a best decision for you right now. Consult with a realtor who cares for your needs and understands what drives the market.
