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The 2022 Housing Market:
First, mortgage refinances. =
In July, every single aspect of refinances dropped to its lowest level…ever reported…in history. In addition to that, this was ALSO the first time - ever - that HOME SALES accounted for 64% of all mortgage prepayments.
Second,Home Prices.
As they report, the housing market has officially shifted from “slowing down” to a “DECLINE” in July, with median prices falling for the first time in 32 months. That means, that annual price growth in July was the fastest single-month deceleration in more than 40 years… falling during a summer month, that usually increases.
Third, they noted that some markets are being hit worse than others:
The largest decline, so far, is awarded to San Jose, California - with a 10% drop in just the last 3 months…along with Seattle, Washington, at 7.7%…San Fransisco at 7.4%…San Diego…Los Angeles…Riverside, California…Portland…Las Vegas…and finishing off with Richmond, Virginia with a decline of 1.1%. All in all, more than 85% of major markets have seen prices decline from their peak…with a third experiencing declines of more than 1%.
So, in terms of what this means for YOU:
One, when seller’s can’t get the price they want - they’re instead, choosing to rent - and this is good news. With more homes being offered for lease…this should help ease low inventory, and bring down monthly prices right alongside with it.
Second, as we approach the end of summer - housing demand typically declines, and that could be even MORE pronounced throughout the rest of 2022.
A RedFin Chief Economist even went so far to explain that “Thanks largely to mortgage rates near or even above 6%, potential homebuyers and sellers are focusing on the back-to-school season and enjoying the last days of summer rather than getting into an uncertain market.”
Three, even though this sounds severe - it’s probably NOT going to lead to an “all out crash.”
For example, Moody’s Analytics believes that - most likely - housing prices will shift somewhere between 0 and -5% year over year, to as much as -10% if we enter a severe recession…this “worst case scenario” still pales in comparison to the 2008 Great Financial Crisis, where housing prices fell 33 percent from the peak, over a period of 3.5 years.
Four, because of that - there are some steps you can take to come out ahead, IF you’re in the market for a home:
One: Shop around your mortgage rate. Even though rates have gone up - significantly - that doesn’t mean you can’t get a better deal with someone else…so, it doesn’t hurt to ask.
Two: Don’t get attached to one any property. Chances are, eventually - something else will come up that’s just as nice, so negotiate as best as you can, and don’t be afraid to walk away.
Three: Lock in a FIXED RATE LOAN. That way, no matter what happens, your payment stays the exact same.
And four: Only buy a home that you intend on keeping for at least 7-10 years. That way, you’ll be able to ride out any fluctuations in the market long enough for it to - hopefully - recover.
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