Source: Forbes —
Key Takeaways:
- A housing market recession occurs when home sales decline for six months straight, which officially happened in July 2022.
- Two main forces are driving the housing market recession: increasing interest rates and increasing construction costs.
- When the housing recession is done, we will enter a housing recovery cycle. This is the best time to buy below-market value properties.
Across the United States, we have seen prospective buyers struggle to find an affordable home and get an offer accepted in the last couple of years. Now we’re seeing those same prospective buyers turn up skittish as home prices fall. Many experts are debating whether this is a housing recession or simply a correction of the meteoric climb of home prices during and after the pandemic. The recent data officially points to a housing market recession, but some believe it’s a housing recession simply because builders aren’t building.
How much are housing prices dropping?
We’re finally witnessing a pullback from the quick jump in real estate prices, but the real question is how far will home prices drop? As interest rates climb higher and home sales decrease, the prices of real estate have come down. Gone are the days of the COVID-19 housing boom that led to bidding wars, all cash offers, and increased home prices across the country.
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March marked the highest real estate values in California history. We have seen a flattening in prices as over-priced homes return to reality. We have not seen six months decline as is being claimed in the article.
In California, housing production has fallen short of actual need to the tune of 200,000 units a year for nearly thirty years. This inability to produce enough to meet demand has created a severe housing shortage in California evidenced by sky-rocketing rents and homelessness.
There cannot be a crash when demand outpaces supply by a significant margin. Houses in the early eighties still sold even with interest rates at 18%. There is no glut of foreclosures coming as they did in 2008. There are no loans made to people who could fog a mirror. This a very different time. The sky is not falling. Scare tactics are irresponsible.