The Housing Market Shift
Over the pandemic, we saw housing prices soar. According to the S&P CoreLogic Case-Shiller US National Home Price Index, housing prices rose by 18.8% in 2021. You benefited from the frenzy if you sold your home during the housing rush. Now that we are no longer in a full-out pandemic and interest rates have risen, things have changed. Mark Zandi, Moody’s Analytic chief economist, believes that the housing market is in a state of correction. What exactly does that mean, and will it be beneficial or detrimental to you?
What Is A Housing Correction
A housing correction indicates an end to the housing boom we experienced over the pandemic. A housing correction also means housing prices will begin falling in some regional markets. This trend is already apparent in markets all across the US. Zandi predicts that housing prices will experience a 0% growth over the next year. It will be the worst growth rate in the real estate market since 2012.
Interest Rates Have Shot Up
During the past two years, interest rates have been running low. Since these rates were low, homebuyers had more incentive to buy. This trend has changed; over the last five months alone, interest rates have increased from 3.11 to 5.1. Even though this may seem like a slight rise, it could potentially mean an increase of thousands of dollars in the monthly mortgage payment for new homebuyers. This increase is enough to deter some buyers from buying a home. The federal government has everything to do with the cost of interest rates. They are tasked with keeping unemployment and inflation down and increasing home interest rates to slow down the buying frenzy.
Homes Have Been Overvalued
According to Zandi, homes have been overvalued in several regions, and this trend will continue to decrease as we slide deeper into the recession and homebuyers become more resistant to buying expensive homes with high mortgage rates. In the US housing market, a little less than half of the 392 markets had houses overvalued by 25%. In some markets, housing prices were overvalued by a whopping 73%. In these highly overvalued markets, such as Phoenix, Arizona, and Boise, Idaho, there may be considerable drops in the price of homes.
How Is This Good For You
If you are looking for homes for sale in LA, do not be dismayed. Things are still in your favor. Fewer and fewer families are looking for homes, and home sellers realize they will have to drop their prices if they want to get actual sales. This means that you have more possibilities when it comes to purchasing affordable housing. Even if you get a higher mortgage rate than you would like, you always have the option to refinance and get a better rate in the future. Don’t be fooled by statistics. Now is a great time to buy in LA, so get out and find your home while the getting is still good.