How Economic Changes Affect The Housing Market

Over the past two years, we’ve seen some of the most unusual and least predictable economic conditions of our lifetimes, but now economists surveyed by the Wall Street Journal say there’s a 28% chance of a recession in the next 12 months, more than doubling the 13% chance this time last year. So what happens if a recession does hit? In this week’s video, Amerifund CEO Brad Rice explains the effects of a recession on the housing market, and what will happen if The Fed can’t keep things under control.

Transcript:

Hello Everyone. Brad Rice here with your Weekly Mortgage Update.

Today we're going to talk about this ever-changing real estate market.

The last couple of years have been extraordinary in so many ways. Covid, lockdowns, massive amounts of stimulus injected into the economy combined with a slow down or even shut-off of our supply chain as never seen before. You look back at these events now and you can see that is was the perfect storm for massive inflation and what we'll soon find ourselves in…the “R” word…yes, recession is coming.

While we've enjoyed these record low mortgage rates, we knew one day it would end. Rates are higher than last year, but as with all recessions, the chances are we will see a draw down of mortgage rates when the recession actually does hit. Don’t expect rates to hit record lows again, that’s not what we’re saying, but they will settle down, and there will be more affordable options.

Home prices are a factor of supply and demand. Demand has far exceeded supply for some time now, and is expected to continue for another 5-7 years based on population growth and the number of available homes out there, but there's a bright side. With rising rates, comes less demand. This will help to stabilize home price and instead of seeing double digit annual growth, we are more likely to see a normalization about 1-3%.

So, what does this mean for you? Well, if you’re a homeowner and you’ve been thinking of selling, now is the time to do it. Actually, right now. Traditionally, April through July are the best times to sell a home. And we’re already starting to see homes hit the market in larger numbers than over the past 12 months.

If you’re buyer and you’ve been waiting, your best deals are right around the corner. There’s a good chance you’ll start to see some price drops in the coming months. But, don’t wait for a huge decrease or crash, that’s not what we are saying. Less competition means more opportunity. And, don’t be afraid to take out a hybrid or an adjustable rate mortgage to help keep your payments low. What we know from history is that chances are you won’t be in that loan for very long anyway. You'll be able to refinance the loan for a lower rate at some point.

Thanks for watching, and we’ll see you next week for another weekly mortgage update.

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