During the past year we have seen the housing market slow down considerably. Of course, this is due in large part to broader economic factors such as inflation forcing the Federal Reserve to raise interest rates aggressively and at a rapid pace. As expected, this rise in rates on top of already high home prices has substantially reduced the number of buyers in the market. From mid 2020 through January 2022, we essentially experienced a free-for-all in the housing market. Homes being purchased sight unseen, offers over asking prices, and bidding wars were quite common during this time. However, today is a new day and both buyers and sellers are having to adjust. Of course, you will notice that the title of this article contains the word “correction”. It should be noted that this is substantially different than the word “collapse”.
Every market is different
Although this may go without saying, every market is truly unique. At the national level, home prices have risen by more than 40% over the past three years. In some markets, these prices have even risen by more and at a faster pace. This growth was largely driven by pandemic-driven moves combined with ultra low mortgage rates. Now that mortgage rates have risen considerably, we are seeing substantially lower buyer demand. With this said, some parts of the country such as here in South Florida are still seeing a rise in the number of Americans relocating to paradise. Therefore, this is keeping both rental and purchase housing demand higher than other parts of the country.
Across the country, the forecast for home sales is expected to be around 4.87 million. For perspective, this would be the lowest level of home sales seen in nine years. Although less buyers are being seen in the market this year, the low supply of homes for sale will actually be the biggest driver in the slowdown. As for home price expectations at the national level, they are largely expected to remain stable with the median home sales price rising by just 0.3% year-over-year.
In closing, it is important to distinguish the difference between a housing correction and a housing collapse. What we have described above is merely a housing correction that will likely result in slight home price changes. What was observed during 2008 was a housing collapse. This resulted from the perfect storm of loose credit standards, a surge in subprime lending, an oversupply of homes and rising unemployment. To be clear, the current environment is nowhere near that.
Are you looking to buy or sell real estate in South Florida? Now more than ever it is important to have a trusted and knowledgeable real estate team supporting you. Contact Natasha at Live South Florida Realty, Inc. to get started. Also, be sure to download the free Florida Home Search app for your mobile device as well.