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Thursday, August 11, 2022

What’s with this crazy housing market?

After two years of boom, the United States housing market finds itself at a critical moment – ​​but what exactly?

This spring should have been a busy time for home sellers. Instead, the season was a dull one, stalled by a dramatic spike in mortgage rates that stunned even industry experts with its chilling effect on the market.

The frenzied environment we had become accustomed to – with its eye-popping price hikes and bidding wars that disappointed buyers and upset sellers – suddenly seemed a thing of the past. While buyers stood on edge, recalculating their much larger mortgage payments, sellers began to realize that demand for offers of $100,000 or more might not be forthcoming.

And in the rental market, it’s “The Hunger Games,” as rents skyrocket and renters compete with dozens of other applicants in cities across the country.

“Right now, we are in this cauldron of uncertainty,” said Jonathan J. Miller, president of Miller Samuel Real Estate Appraisers & Consultants. “Housing hates uncertainty. The biggest enemy of the housing market is uncertainty, and we have a bucket full of uncertainty.”

The New York Times asked analysts, economists and brokers to provide some clarity in these confusing times. Did they see this moment coming – and if so, what lies ahead for us in the near future? What would they do if they had to buy, sell or rent now?

What’s with the interest rates?

Unless you’re paying cash, buying a home has become a lot more expensive.

Since December, in response to moves by the Federal Reserve to control inflation, mortgage rates have nearly doubled – rising to nearly 6%, the highest since 2008. In January, a buyer would have paid about $2,100 a month in principal and interest for a $500,000 home loan. Today, the same loan would cost about $2,900 per month.

According to Zillow, many buyers simply cannot absorb that kind of increase, especially when it is combined with current home prices, which rose more than 20% from May 2021 to May 2022.

“It’s a one-two punch that a lot of buyers can’t overcome,” said Rick Sharga, executive vice president of market intelligence at real estate data company, Attom.

Experts are not predicting that rates will return to the highs of the 1970s and 1980s – they peaked at 18.4% in 1981 – but they will continue to rise until inflation subsides.

“When inflation peaks, mortgage rates tend to peak, and that’s really the key factor,” said Greg McBride, chief financial analyst at Bankrate.com. “If we get more inflation numbers like we did a few weeks ago, there’s no telling how high mortgage rates can go.”

The fast turnaround didn’t just hold shoppers. Several industry experts have had to re-examine their predictions for the months ahead.

“I don’t think anyone on the planet expected them to double in six months,” Miller said. “It’s a monkey wrench, another calculation, thrown into the mix.”

“We all had rose-tinted glasses when the vaccine was underway and it looked like everything was going to get better,” said Daryl Fairweather, Redfin’s chief economist. “It turns out it’s a rough ride to reopen the economy and get things back to normal.”

Will house prices fall?

Prices are unlikely to fall, but the cracks are visible. According to Redfin, in the four-week period ending June 26, the average asking price for newly listed homes was 1.5% down from its all-time high this spring, and an average of 6.5% of listings dropped their prices each week. report good.

Demand is also less. The same Redfin report found that fewer people were searching for homes on Google and asking to visit properties. According to Redfin, mortgage applications were down 24%, and pending sales fell 13% from the same period a year ago, the biggest drop since May 2020.

“The long-term outlook is still pretty strong,” Fairweather said. “But in the short term, with all the volatility in the economy, home prices could drop between now and next spring.”

At least for now, though, the days of double-digit percentage growth are likely to be over. Markets such as Tampa, Florida and Phoenix have been the biggest gainers in prices, which could take a hit with 5-10% declines. Others may remain flat or see modest growth, like the 6.6% Realtor.com is projecting for 2022.

But prices are unlikely to drop — partly because inventory is still low, and there are more people who want to buy homes than there are homes to buy. Although the list of active listings increased by about 19% in June from a year ago, it is still down 53.2% from 2019, according to Realtor.com.

“People waiting for home prices to drop are probably going to be disappointed,” said Sharga. “It’s not 2008 again – we’re not looking at a housing bubble.”

To buy or not?

It’s still a seller’s market, whether he feels like it or not.

In May, the average home price in the United States crossed $400,000 for the first time, according to the National Association of Realtors. According to Redfin, bidding wars accounted for 55% of home sales in the four-week period ending June 19, up from 53% a year earlier.

But with so many mixed signals, shoppers may want to look forward to the summer or even spring of next year.

“Most likely, prices are not going to rise between now and then, and there is a chance they will drop,” said Fairweather, who described the current moment as hibernation. “It doesn’t bode well for Redfin’s business, but that’s what’s happening.”

But if you need a home right now—and you can stomach a roller coaster—the world looks a little brighter when you squint. Yes, your monthly payment will be higher than what you bought a few months back. But the low rates of 2020 and 2021 weren’t entirely your friend: They fueled a runaway train of soaring home prices, pushing the limits of affordability. Soon, buyers may be in a better position than they have been in the long run.

Miller, who said he was “thrilled” to see the rate hike, pointed out that “5% mortgage rates are not a bad thing in terms of sustainable housing markets.

Remember: Rates fluctuate. Unlike the price you pay for a home that is permanent, the mortgage rate is not. Or, as Sharga put it, you can “date the rate, but get married at home.”

Not surprisingly, real estate agents, who earn their income from home sales, are now upbeat about the purchase, arguing that for the first time in a long time, buyers can get a deal.

“You have to be a bit of a cowgirl,” said Bess Friedman, CEO of Brown Harris Stevens, who predicted in his second-quarter market report that Manhattan was going to be a buyer’s market. While one buyer may fear volatility, another “Can come and say, ‘You know what, there’s one hell of an opportunity right now. I have money, I’m going in, I’m going to negotiate, I’m going to get a great price.'”

As the market cools, it resembles a pre-pandemic normal, with homes that take months to sell and prices gradually rise. Buyers can begin to make some reasonable demands – for appraisals, inspections and mortgage contingencies. And as inventory grows, they may be able to compare a few options before making a decision.

“I expect that we are at a point now where we are in a return to prudence,” said Leonard Steinberg, a corporate broker at Compass. “Getting things going at a normal pace – or a more sensible balance – is good for everyone.”

Selling…???

It’s time for sellers to reset their expectations. List your home today, and it’s unlikely that 24 hours from now you’ll have the chance to get a full-cash bid of $150,000 more than the list price from a sea of ​​casual-free offers.

“Those days are over,” said Lawrence Yoon, chief economist of the National Association of Realtors. “Don’t expect multiple offers.”

Your home could sit on the market for a few weeks and, if priced well, sell for around the asking price – which is what you would have gotten a year ago.

Those planning to sell next year would be better off doing it sooner rather than later. But if you can wait until the market settles into a new rhythm, you may have a better idea of ​​what to expect two or three years from now.

“If you can wait, wait until the awkwardness that is happening in the economy goes away,” Fairweather said. “The long-term outlook is more rosy than the short-term outlook.”

And there’s another reason to wait: If you sell now and plan to buy, you can trade a lower mortgage rate for a higher one, and buy into an unpredictable environment.

“We are not talking about selling a stock where there is a desire to take an absolute top. It’s where you live,” McBride said. “At least worthy of equal consideration as to where are you going?”

What rent to pay?

Pick almost any city across the country – Austin, Texas; Nashville, Tennessee; Seattle; New York — and the story is one of rents growing by a double-digit percentage among low inventory.

Nationally, the vacancy rate is less than 5%, according to RentCafe, with more than a dozen renters competing for any number of vacant apartments. This translates to exceptionally high fares. In Manhattan, the median rent reached a record $4,000 a month in May, according to data from Douglas Elliman. That same month, the typical US asking rent exceeded $2,000 for the first time, according to Redfin.

The rental market has been on a wild ride since the spring of 2020, with no end in sight. At the start of the pandemic, markets in cities such as New York saw rents drop as residents left and vacancies increased. Concessions, including months’ free rent, became the norm. But those discounts soon disappeared, and rents in New York now assume 2019 levels. Other markets, such as Miami, never experienced a sharp decline, as renters from other cities who were able to work remotely moved in.

“Everyone wanted more space, and a lot of people wanted their own space,” said ApartmentList chief economist Igor Popov. “Those renters grabbed inventory at a time when it was really hard to build” and buy.

As he put it, “It was this perfect storm of raging demand and tight inventory.”

With few good options, renters who may move this year have decided to stay: About 62% have renewed their leases, according to RentCafe. This means there is less available inventory in the market which has long been plagued by new housing shortages.

“Many renters feel like they’re in a crowded subway car,” Popov said. “If you have a seat, you might be uncomfortable, but you’re not getting up.”

Joshua Clarke, a senior economist at Zillow, said he was struck by how fast rents have risen: “There was a warming, but the fact is we’re on these numbers – if I had predicted I would have to be myself.” But laughed.”

In the short term or the long term, the forecast for renters does not look good. A rise in mortgage rates will push some buyers out of the sales market, putting more pressure on the rental market. And as fares go up, so will fewer people walking by. With no respite from the inventory crunch, tenants have few options.

So what should tenants do? If you can renew your lease, even at higher rents, chances are it will be cheaper than moving. You might consider getting roommates or looking into cheaper neighborhoods. But neither choice is pleasant, and no one has the crystal ball to predict what will happen in the future.

“What’s happening in the rest of the economy is going to be the major X factor,” Popov said. “If we start seeing big changes in the economy, all bets are off and we are in a new world.”

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.
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