30-year mortgage rates are near 8% with excellent credit. Interest rates have climbed for the past three months straight. The Fed is considering another interest rate increase for November and December, possibly pushing rates up to 8.5% or even 9%. The reasoning is that higher interest rates will "slow down inflation".
Home sales are at a 13-year low. Factor in the higher cost of insurance and the fact that property taxes are going up to unaffordable levels and the very high cost of labor and materials for home construction... and you have a real estate market that's going to crater.
I personally know several homeowners that had their homes listed for sale, but have removed them from the market in the past 2 months. They will wait and hold on to what they have for now. One real estate agent mentioned to a couple that they should keep their house off the market until at least middle of next year and then decide based on market conditions.
I'm suggesting that the U.S. economy is a three legged stool... and one of those legs is housing and private & commercial real estate. If it fails, the economy goes into a deep recession at best.
If someone has a house wouldn't the best thing to do be sell now while they can still get a good price? (assuming they wanted to sell)
It depends. Most people have to buy a new house in addition to selling and generally try to upsize. If the price drops drastically, the home owner eats a higher loss than if he/she stuck with the current home. Interest rates are also much much higher than they used to be.
For instance:
Let's say you have a 100k house with the mortgage paid off and let's say the market is going to drop by 30%. If you keep that house you are down 30k on paper but are only paying property taxes and insurance.
Let's say you sell it and buy a 400k house. You are left with a loan of 300k at 8% and the 30% drop loses you 120k!! instead of 30k. The resell value of your house is now 280k, less than your mortgage!
Not only did you lose more than the value of your original house but you're stuck with an 8% mortgage until they lower it someday.
Yeah, i can see it being a problem if you plan to buy a house right away too. If i was going to sell now i'd get a an RV, and get the rest in Gold hidden somewhere really good, just to lock it all in, then wait for a year or 2 and trade the gold and get a new house. But i'm not selling, and trying to time the market never works out (for me, at least).