Flourishing economies come and go like fashion trends, every decade it seems the economy reaches record highs, only to conclude in recession. As a result of a tightening economy, the real estate market seems to bear much of the burden brought on by over-extension. All markets are supply and demand driven; when demand dries up and inventory skyrockets, prices fall. As the current American economy unravels, signs of a slowing housing market are evident, leaving many that must sell their homes during these unfortunate times in a venerable position. Average Americans are typically not the big spenders that bring our economy into uncharted territory, but they are the ones that suffer when stock and real estate values plunge. Fortunately, not everyone will experience hardships in a shrinking economy and those who must sell their homes in this economic environment will be protected if they turn to less conventional methods.
When a home hits the market, it typically does so through a real estate agent. Even as agents are worth their weight in gold when they offer great advice and can maximize the seller’s profit, this becomes increasingly difficult during a recession. For the past couple of years, listing a home on the market meant multiple offers and a quick sale, but those cases are quickly shrinking. Paying a real estate agent 6% of the net sale of the home becomes much more expensive when the home sells well under the asking price. This period of cooling in the real estate market has been inevitable. Areas that saw the quickest spikes in property demand are some of the first to see a decline. According to an article by Fortune, “Moody’s Analytics forecast model predicts that The Villages in Florida is poised to see the biggest drop in house prices.” The receding economy may seem as an impossibility as many have seen the drastic rise in demand brought on by the pandemic, however, this decline becomes more understandable when considering some of the catalysts for the unprecedented demand.
In March of 2020, the world came to a grinding halt as medical professionals encouraged everyone to stay home until the Covid-19 pandemic was over. With hopes of stimulating an otherwise dead economy, the United States Federal Reserve slashed interest rates to record levels, allowing banks to make loans with hardly any interest. Stimulus checks were also sent out as a way to stimulate the economy. Those in power during this time were so focused on relentlessly trying to keep the economy afloat, that they neglected to consider the long-term effects of printing astounding amounts of money. It came as no surprise that a mad dash for homes was underway as those who had to stay home wanted a larger space and now had a once-in-a-lifetime opportunity with historically low-interest rates. This housing climate was evident from 2020-2022 and just recently began showing signs of decline. As the United States recently underwent its second quarter of negative GDP, economists conclude the United States is in a recession and the decline of housing prices has just begun.
The economic forecast of America seems bleak as many see the equity in their homes deteriorate, however, this cycle is natural and needed to sustain a healthy economy. Without corrections in the economy, inflation will run rampant until the value of currency dwindles to uncharted territories. To prevent the already painful inflation evident in the US economy, the Federal Reserve has made a 180 in its approach to sustaining the economy and has brought interest rates to levels unseen in decades. Those who were relentlessly seeking a new home have to now scale back as the inflated prices of homes become unattainable with the current mortgage rates. When consumers dry up, prices dwindle, which is what we are watching unfold in the current housing market. Fortunately, housing prices are not permanent and when the United States enters a period of positive GDP growth, home prices will likely surpass current records.
Being a homeowner during the state of this economy is not necessarily a bad thing. Buyers who locked in historically low-interest rates will likely have lower payments than those who buy homes as prices fall and interest rates spike. The only negative aspect to owning a home that is purchased at the top of the market with a low-interest rate comes if homeowners are forced to relocate due to a career or growing family. Those who must sell their homes before prices recover will likely owe more than what the home is worth or walk away with significantly less equity than before. If you find yourself in this situation and need to sell your home before the housing market recovers, call Helpful Homes. Those who choose not to forgo the conventional route of a real estate agent will find that Helpful Homes buys properties in their “as is” condition and pays fair market value, without any commission or fees. Helpful Homes may even facilitate a short sale with the bank to ensure sellers are not writing a check to sell their home. The past couple of years following the pandemic have been historic, but the gains we quickly saw in the stock market and real estate is reversing just as quickly. The unfortunate fact of life is the market and certain life events are impossible to time, and many that purchased homes during the post-Covid real estate boom will have to sell prior to values returning to their all-time highs. Instead of choosing the conventional method, save your money and sell to Helpful Homes.