For the past two years, the Real Estate market all across Florida has skyrocketed in pricing making it a blazing hot seller’s market that kept rising every month. Federal reserve chair Jerome Powell commented on the craziness that ensued all across the country in an interview saying, “we’ve had a time of a red-hot housing market all over the country, where famously houses were selling to the first buyer at 10% above the ask even before seeing the house”. The Pandemic Housing Boom driven by a demand surge saw home prices across the country sell fast and soar far above what incomes would historically support. As you may have heard these past few weeks, the Federal Reserve has been attempting to create a market cool-down to control the pricing of homes and bring a correction back to the market. “Why” you may ask? If there is a large demand for homes that provoke a continuously rising market, why would the Feds try to stop it? The problem with a continuously rising market is the imbalance between supply and demand. Higher and higher prices means less affordability in the long term so a correction is necessary to create price-cuts on the value of homes so that demand can be up to par with supply again.
No doubt rising interest rates and heavy inflation has caused a burdensome effect on the average home. While the slowdown started out mild, it has since intensified. On a year-over-year basis, new home sales and existing home sales are now down 29.6% and 19.9%. That means there are price cuts happening on new construction homes! This is causing a huge halt on demand that we started seeing once the interest rates went above 5% making drivers of the boom such as investors and second home buyers back off. This inevitably causes a large ripple effect throughout the economy. As mortgage rates move higher, home sales and homebuilding move lower. That causes demand for services like home loans and moving crews to fall. It also causes demand for commodities (like lumber) and durable goods (like refrigerators) to fall. Those economic contractions then spread throughout the rest of the economy and, in theory, help to weaken the labor market and curtail inflation. Which means there is hope yet in the horizon.
What does this mean for you?
When you as a homeowner find yourself in a particular circumstance where you need to sell your home, there is a lot of uncertainty as to how you will do so in this fast-changing market we are experiencing today. Many experienced realtors are unsure how to advise their clients and resort to attempting to produce hope that the house will sell. In this market, a house has to be in the best of conditions to convince someone to buy. When it comes to investors, most are taking a step back because of the high risk and uncertainty. It’s important to work with investors/realtors that are experienced professionals who have seen changes like these in the market before and can give accurate and expert opinions on your best available course of action. If you are looking to sell you home and want a little certainty in these uncertain times, reach out to Homeinc.com who have experts around the clock to aid and guide you in your transition to the next chapter of your life.
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