Many clients have been asking lately if it’s a good time to be in the market? In order to answer this, it’s important to remember that the timing of the market is never going to be perfect – time in the market is what really matters.
Recently, there has been a lot of talk about price reductions in homes on the market. Reductions range anywhere from 10-15% (bearing in mind that this is a national average and will be highly dependent upon the specifics of a particular market area), with 8% of listings having price decreases based on a 4-week rolling average. It’s important to contextualize this 10-15% decrease, as home values are up 35-40% from their 2019 values, so we are still looking at a sizeable net gain over the past several years. More importantly, it signals those prices, and the housing market are beginning to stabilize. In reality, the average price reduction of 10-15% is a necessary market correction that increases the market’s sustainability and moves the market closer to a state of normalcy – driven by various market forces. With that in mind, a 10-15% correction compared to a 35% appreciation curve over the last three years is not something to panic over. For example, when we look at the appreciation curve from 2009 to 2017, it was very low, with values not improving much during those years. In addition, we had very low-interest rates, sellers doing 1031 exchanges, available inventory, and many other free market factors motivating people to get transactions done before the situation changed.
There have been mentions of the state of the housing market in 2008. However, this news shows significant differences between the market in 2008 and the current market. To explore this further, let’s take a look at the state of the housing market in 2008:
- The year 2008 was a tough one for buyers and sellers. The housing market collapsed, mortgage interest rates fell to all-time lows, and the credit crisis hit.
- At the end of 2008, foreclosure rates had increased by 80% from 2007.
- The average mortgage interest rate was 5.71%, with an average of 0.5 points for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less)
- The average interest rate on 15-year fixed-rate mortgages fell to 5.26% in 2008. By 2017, the average interest rate for 15-year fixed-rate mortgages had fallen to 4.35%.
- The median price nationally for existing single-family homes dropped 5.9%.
- In California, among the top 10 most expensive states for real estate that year, the average listing price fell 6%.
These key differences mean we will not see values waterfalling like they did some years ago. In addition, there is currently a lot of cash out there. Having just come out of a refi boom, many people have interest rates of 2-3% if not lower, and most people have equity in their homes – which means that we are not going to be seeing the same buy-and-bail that we did back in 2008.
If you or someone you know is looking to buy a home, or simply interested in exploring their mortgage options, schedule a free 15 minute mortgage consultation today!