We understand there’s some uncertainty about the market as people watch the roller coaster mortgage rates. After 2008, whenever abrupt change occurs in the housing market, people start to assume the worst.
However, the LaMon Team is here to tell you that a housing crash is highly unlikely for the 2023 market. Let’s take a look at the differences between today’s market and the trends leading up to the housing bubble.
Perhaps the greatest mistake in the 2008 market were the slipping restrictions when it came to qualifying for a loan. Banks would approve nearly anyone who cam in looking for a loan to pay for a home they couldn’t afford. With an increase in loans and no one to pay for them, this created artificial demand in the housing market. Many people defaulted on their loans, thus contributing to a wave of foreclosures across the country.
After the bankers’ built-up an artificial demand, builders rushed to keep up with the fast-paced market. However, once people began to default on their loans and foreclosures flooded market, the housing inventory quickly doubled in supply. This resulted in too much supply and not enough demand—forcing national home prices to plummet at an alarming speed.
Many experts predicted the mortgage rates to ease-off at the end of 2022, but the recent hikes in the market are starting to turn some heads. This is a direct result from the Feds attempting to combat inflation. While many people hoped inflation would settle as the year progressed, it has remained surprisingly steady.
The Feds will continue to spike the mortgage rates as long as inflation is still creeping upward. So, it’s possible to see the rates yo-yo up and down throughout the first half of the year as the Feds decide when to conclude the uptick in mortgage rates.
What do we mean by “rate locked”? A wide portion of the nation’s homeowners are sitting on a mortgage rate around 4% or lower, and they are hesitant to enter the market and swap their rate for the current percentage. This lack of inventory has contributed to another housing shortage.
As we compare the current market trends to the housing bubble of 2008, it’s clear that we are tackling much different hurdles—and luckily, these seem to be temporary trials. The mortgage industry has much higher requirements when it comes to qualifying for loans, and this has reduced the chances of another inventory bubble happening anytime soon. Luckily, experts foresee the mortgage rates leveling out throughout the year as the market picks up in the spring and summer months.
And as for home prices, we are still experiencing a shortage of inventory. As long as demand outweighs supply, you can expect your home to continue to appreciate, even if it’s at a slower pace than back in 2021.
In conclusion, the market we’re facing today is much different than the trials we endured back in 2008. Sellers should not worry about their homes depreciating, and buyers are recommended to keep an eye on the rates as they slowly ease down throughout the year. Keep in mind, with both a shortage of inventory and buyers afraid of the mortgage rates, now might be an opportune time to hit the market and avoid the waves of competition.
If you are considering entering the market or have any questions about what to expect this year, our agents at the LaMon Team are always here to help! Give us a call, and we’ll take care of the rest.
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