2023 is not like 2008

Another housing crash weighs on a lot of people’s minds. Sharply rising mortgage rates, a steep decline in home sales and a record price appreciation slowdown have raised concerns that the housing market could crash. I get the logic, yet experts argue that these market trends are a symptom of a correction after two years of massive growth.

I wouldn’t expect 2023 to be like 2008. For one, something as extreme as 2008 only occurred twice in the past 100 years…. the first was the Great Depression in the 1930s. The second was the Great Recession beginning in 2008. The housing market and overall economy is completely different now versus 2008.

There are two huge differences:

• Risky mortgages created an environment where people could buy more home than they could afford to pay. If people lost their jobs (and they did), it created a vicious feedback loop a cooling market/declining value market + more foreclosures = more declines in home values (and this cycle kept repeating itself).
• In 2008, there was a glut of housing inventory. For once, too many homes were being built. This is the opposite problem we have today with housing inventory levels in Atlanta hovering around 3 months (ideal amount is 6 months to create a balanced market).

There are also too many people who do not own a home that want to buy a home. The housing glut in the 2000s was followed by close to a decade of under-building that contributed to a shortage of millions homes today. This was exacerbated by millennials coming of age near the end of this period of underproduction along with Boomers not downsizing as previous generations did (moving in with extended family, or to retirement communities, or to assisting living/nursing homes). The lack of homes along with the housing needs of the two largest generations in the history of this country (one looking to buy their first homes and the other not selling their homes) should put a floor on home prices.

While 2023 isn’t like 2008, 2024 could be like 2020- 2021. When the national media begins talking about “now being a great time to buy a home,” we’ll see a similar situation as we did during the peak buying years of the pandemic. This is why I keep harping on now being a great time to buy. Purchasing a home now with fewer competitors – even with a slight decline in home values – will be much better than double digit offers, over asking price offers, no contingencies, etc. as we are likely to see the next time it is ” a good time” to buy.

If you are thinking, “maybe 2023 is a good time to buy,” contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!

Home prices stabilizing

I started the year saying now is a great time to buy a home. For the month of February, I’ll include a series of posts expanding on this thought process. We’ll touch on affordability, housing prices, and the shortage of homes.

Let’s start with affordability. Zillow, Seattle, said U.S. home values are easing down, starting to provide relief for potential home buyers facing affordability challenges. Zillow reported the typical U.S. home fell to $357,733 in November, and is now down 0.5% from the peak peak last year.

Add on the fact mortgages rates improved to end 2022/start 2023, monthly costs for home ownership went down for the first time since July, and for only the second time in the past 19 months.  

We are not at a point of home prices dropping (more on this in the next post). But for the first time in several years, we aren’t seeing double digit appreciation.

Zillow Senior Economist Jeff Tucker said November’s news is a positive sign that affordability may at least stabilize in 2023, helping households budget and plan for housing decisions in the months and years ahead. Tucker said, “The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition.”

As I said to start the year, the articles saying 2023 is a bad time to purchase a home aren’t talking about the lack of competition. The quote from Zillow’s Senior Economist is spot on for those who are looking, and they are seeing contingencies, sellers doing repairs on homes, and seller concessions.

Beginning to think 2023 may be a good time to buy a home? If you are buying in the state of Georgia, contact me today! I can get you pre-approved quickly and have you out making offers in no time!

Home values rising

As my colleague Rodney Shaffer touched on earlier this week, it is really competitive out there in the housing market. A by product of a seller’s market is housing prices go up and up and up.

FHFA’s recent report states home prices increased over 5% in the second quarter of this year. Sure, values dipped in the Spring due to Covid. Once people began feeling more comfortable and states began opening up, the housing market took off.

This trend is expected to continue as the economy rebounds and more and more people get back to work. Fortunately historically low interest rates are offsetting some of the impact of rising prices.

How does one operate in a hyper competitive market?

• One method is doing a TBD underwrite. Rodney touched on this in his last post too. Go ahead and get through the underwriting process. This way the seller knows your loan is already approved pending a contract, appraisal, clear title, and ability to insure the home. It definitely gives you an advantage over other offers that go through the absolute minimum to make an offer
• Another thing is being very available to view homes. Homes are going under contract in just a few days. Unfortunately, seeing a home come on the market mid week, it is probably under contract by the end of the week. If you see a home come on the market, and you love it, chances are everyone else loves it too. You’ll need to get out and see it within 24 hours.
  

The housing market won’t be like this forever, but right now, it is the hand we’ve been dealt. If you are looking to purchase a new home in Georgia, contact me today. I can help you get started, work with you to get a TBD underwriting approval, and give you an advantage as you make offers for your new home.