Is It a Crash Coming to Miami?
How The Increase in Interest Rates Will Impact The Real Estate Market?
If you’ve been in the real estate market, you must wonder what this sudden hike in interest rates is. Why has the interest rate risen so much?
I must share that I am not a financial advisor or an economic expert. In this blog I am going to share some information with you in about public data, facts, and recent articles from experts.
There Goes The Fear! What’s Going On In The Market?
A few days ago I hear on Facebook Live this quote “Change leads to uncertainty, uncertainty leads to fear, and fear leads to paralysis.” This is the most honest thing I‘ve heard for a long time.
Look, all the fears in the industry right now are nothing but rooted in fear of uncertainty and change. Because many people don’t understand the change, they start panicking and spreading more panic in the air.
First, you must understand why the Feds raised the interest so much. The Feds are currently riding on a foreseeable wave of inflation, and the stakes are very high. If they don’t take prompt actions, we will likely see adverse effects, but if they spike the rate too high, the whole economy can be substantially weakened. Thus, the Feds are targeting a short-term rate hike for long-term stability. This is called a Soft Landing, which the Feds are trying to achieve.
How Will It Impact The Real Estate Market?
The U.S treasury and mortgage rates have already braved the storm and reflect the hike in interest. As a result, consumer buying power is reduced as borrowing money has become more expensive. It all depends on how much this interest hike from the Feds can curb inflation.
Check this Facts
This is the Market confidence index survey by the National Association of Realtors.
- The median days on the market, which is remarkable, according to this report only 16 days, where it was 17 days the previous May. The same is the case with the percent of homes sold in less than a month, just a single-digit difference from last year.
- The percentage of first-time homebuyers, which is way less 27% the past month to 31% last year, reflects today’s market and fear. This is also reflected in the number of offers received on each sale which is 4.2 offers in May but was 5.5 in April.
-
Another thing that the reports shows is that 24% of buyers waived the appraisal contingency, down from 26% a month ago and 28% a year ago.
These numbers are an excellent way to gauge and understand the confusion and fear about the future. And how the spike in interest rate has affected the market confidence. The rise in inventory will also the buyers get a level playing field.
Let’s See Some History In Recent years
Let me walk you into 2019 or before 2020 when the summertime usually experiences a slight dip in the real estate market as people splurge on other activities. But after 2020, Real Estate has been the prime focus for a couple of years
And now, when borders have opened up, and people have started to travel, we are experiencing the same decline and NOT A CRASH, remember that. We are seeing a market neutralizing or going back to what it was before 2020. So this is more of a similar cycle to what we experienced in 2020.
The pandemic had boosted the industry for a couple of years, and just look at where we were in the pre-pandemic times. The surge has to come to a rest, with things coming back to normal now.
The Existing Homes Sale
Have a look at the existing homes sale, the recent data May resulted in numbers very similar before 2020. It’s actually forecasted that sales stays very similar to before 2020.
Also, there is always a decline in mortgage rate history after each recession. 6% might seem a lot, but it’s not the 8% average nationwide we have experienced and nevertheless the higher numbers hike we experienced in other years.
How Will This Interest Spike Affect The Real Estate Market?
With the rise in interest, mortgage rates have become more expensive. This result in a decline in buying power that slumps the housing market making buyers go below the asking price. Property Values and housing prices are directly related to mortgage rates, but we often forget that these factors heavily depend on our economy.
What Do The Experts Say?
Danielle Hale, Chief Economist of Realtor.com, in relation to the current situation, he says: “The housing market is at a turning point…. We are starting to see signs of a new direction, but the ball is still in sellers’ courts in most housing markets.
… Experts don’t believe the market is in a bubble or a crash is in the cards, like during the Great Recession. The nation is till suffering from a housing shortage that has reached crisis proportions at a time when many millennials are reaching the age when the start to consider homeownership. That’s likely to keep prices high.”
To add to the previous quote, Realtor.com’s newly-updated 2022 forecast predicts inventory will grow double-digits over 2022 and offer buyers a better-than-expected chance to find a home.
This should at least calm the nerves of many as now the supply chain problems have been resolved, and you will see more houses going to be listed, buyers will have more options, and it will be a healthy competition, to say the least. Definitely, let’s keep looking at how the market acts and what experts says in the future.
Having all this panorama the most important question would be: Is it convenient to buy a house?
Should You Buy A House?
The answer really depends. If you’re starting a family, if you want to live the American dream, if you finally have enough in the bank to buy and live in the house, you dreamt about, or maybe you are renting and you recently saw the huge spike in rent prices, then it’s a definite YES, you should be looking for a home, and the current conditions might even favor you.
On the other hand, if you want to buy a house as an investor, keep it for a couple of months or a year, and then make a profit, then it’s not the time for you. So, it’s a no for the investor but a yes for everyone who wants to move in and live in their new home and stop paying rent.
Impactful Data That You Cannot Miss
In this graph you can see what the last 6 recessions looked like, the home price change during those last 6 recessions.
It’s important to understand history proves an economic slowdown does not equal a housing crisis. While a recession could have an impact in our housing market does not equal a housing crisis. For example, as you can see in this graph 4 of the last 6 recessions, home prices actually appreciated. Prices fell in the other two – minimally in the early 90s and then by nearly 20% during the housing crash in 2008.
Today’s housing market is nothing like it was in 2008.
Hopefully, you realize now that a recession does not always equal a housing crash. But, some buyers have run out of the market, and now there is less competition. Let’s keep an eye of all the housing market indicators and of course with what experts are currently seeing.
If you are thinking about buying or selling in Miami, CLICK HERE or you can call me at 786-376-2398.
To know a little more about this wonderful city or about the market update, I invite you to subscribe to my weekly recap NEWSLETTER. Every week I publish interesting information about Miami, FL and other things that will be very useful for you.
Sharon Colón
Your Favorite Real Estate Agent in Miami
Home Miami Realtors
786-376-2398
[email protected]
www.sharoncolonre.com
