- Tom BrezsnyShift Happens Part 5
Continuing the conversation… We were in the longest-running, highest appreciating market of all time until about four months ago when things suddenly began to shift. It turns out that the market wasn’t bulletproof afterall and rising rates, stock market volatility, a lingering pandemic and continuing concerns about inflation and recession have taken their toll.
There’s an entire generation of buyers, sellers, agents out there who have never experienced ANYTHING BUT a wild, multiple-offer marketplace with prices shooting through the roof! Since reasonable perspective is in such short supply, here are few thoughts that might help provide some:
Prices: They haven’t gone down yet, they just aren’t going up. The median price on the Coast in June was $1,330,000. That’s on par with the amazing high’s of 2021.
Interest Rates: 30yr fixed rate mortgages at 3% are not normal.. Rates are currently in the 5.5% range and for the last 50 yrs the average has been way higher. That’s the new norm people are going to have to get used to.
Recession: Not all recessions are alike but the only one most people remember is the Great Recession of 2008. This one will be different. The sky isn’t falling and prices aren’t going to drop like a stone. The recession of 2000-2001 is a better example..
Stock Market Volatility: Despite bear market pronouncements and doomsday predictions, the three major stock indexes are still well-above where they were pre-covid. Remember when the Dow seemed disconnected from the everyday life most people were experiencing? It was!
Crash? This shift is not a prelude to a crash. Over the last 10 years buyers have had to qualify for loans with good credit and ample incomes. They have put huge percentages down or purchased with cash. People have lots of equity and they won’t be walking away from their mortgages like in 2008.
For Sellers: Just like the stock market, you’ve had huge gains over the last few years and if you sell now, you are going to have to give some of them back. The sooner you accept it, the more you’ll get to keep.
Rents: For those thinking they’d rather rent than own for the foreseeable future, note that when sales slow, the demand for rentals increases and drives the price of rents up. With a 30 year shortage of housing units here, rents are about to take another jump.
Why Buy: If you think buying a home is about making money, then it’s time to reexamine your priorities. Homeownership is a quality of life decision. Over the long term, homes are great investments but that shouldn’t be the number one reason for buying one.
