Are we headed for a housing market crash?
What we know so far is that the FED will raise interest rates, as a response to rising inflation.
So what does that mean from a Connecticut home buyer’s perspective? To put it simply you’re going to pay more per month for the same priced home than you would have a year ago. So many of my Connecticut buyer clients in last year’s market experienced the fear of buying too high and then seeing a stark change. There were many who simply did not participate in purchasing a home siting that they would rather ‘wait it out until things settle down’. Here’s the unfortunate reality for many who chose to go that route… While you may have dodged the ‘overspending’ bullet, you are actually paying more for the same house now as a result of the higher interest rates.. Don’t believe me?
Here are some facts:
A home in 2021 sold for $400,000 with a 3.25% interest rate. $2002.00 monthly payment with taxes, insurance and mortgage.
That same $400,000 home if sold now in 2022, not only has not seen a market reduction, but now the same $400,000 now $415,000 (or more) home is going to add an extra .75% per month for the next 30 years to your budget… $2,150 monthly. That hits you right where it hurts.
For many people with the fear of overspending, let me shed some light on that. In 2015 the last ‘spike’ in the market, folks paid $400,000 for a beautiful colonial in East Hampton Connecticut. In 2019 that same colonial would likely sell for $389,000-$395,000 which isn’t too dramatic. Now, you can expect that same home to sell for $450,000. That is less than 10 years…
What should you do?
My advice to anyone concerned with buying during a high market is this, if you are worried about a downturn in the housing market, it may be because you don’t have a long term plan. Real Estate is a long term investment. You can’t expect to purchase low and sell high like other asset classes. There are too many factors at play.
So will we have a housing disruption with massive losses in the near future? I couldn’t tell you…. But what I will say is that there are more people in this market with equity in their homes than there were before… There are fewer homes available than EVER in history, and despite the fact that the interest rates are going up millennials are getting tired of waiting on the sidelines. I mean really, can’t we get a break?
My prediction is that the interest rates will level out around 4%, buyers will continue to suffer the reality of the scarcity in the market and many buyers will not qualify for the homes they could have had last year… timing is important but all you can guarantee in real estate is that if you plan to be in the home at least 10 years…. Then you are going to see returns, even in a high interest rate and high cost market.
The 80’s market had interest rates of 16%+ and yet those homes are 3x their original value… So… don’t be so quick to settle for renting, you might miss a good opportunity.
Keep up with the market on my website: Realtor-Robyn.com and check your home’s value instantly. Or check in Daily on Instagram @realtorrobynct.