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.
Home values have not fallen that much nationwide. Many areas are still at or close to peak. Personally, I believe that home values will need to return to pre-Covid. Most markets overcorrect when they crash so I'm guessing 2018 values.
I think you would be surprised that at least 99% of geographical areas have fallen by at least 20%. If you do some work, you will see listings often times are high because if the seller doesn't get close to the list price there is no way they can sell since they would have to have a mountain of cash to pay off the balance of the mortgage. There is a severe shortage of inventory right now and most homes that are listed aren't selling and often times taken off the market.
https://ycharts.com/indicators/us_existing_home_median_sales_price
The median existing home price in Nov 2019 was $257k The median existing home price in Nov 2023 is $394k The peak was around 410-420k.
Home prices would need to fall 35% just to get where they were 4 years ago.
Many people get pulled into median home price statistics which do not in any way indicate value. Median Home Price simply means 1/2 sold for more and 1/2 sold for less. The fact is more expensive homes are what sell in a crappy economy because the average Joe has his hands tied due to higher interest rates. People who can't afford the higher payments tend to wait out the market. Lower priced homes don't get listed for sale since those sellers usually need to buy up in size which could mean double their existing payment.