"Don't buy real estate right now," I keep hearing on the news.
Are you serious? It's not just in the news; it's also being promoted on social media.
And you have to be careful in entertaining those claims because there is no housing crash as of right now.
Where did these “fear-mongering” whispers stem from? It stems from concerns about a possible recession that triggered reminders of the 2008 housing bubble. There is nothing wrong with having some level of concern for possible economic decline.
The problem is, if news outlets and influencers on social media start saturating our feeds with sensationalized titles inducing baseless fears, or spouting negativity not backed by hard facts, there will be confusion and misinformation. And people might miss out on opportunities in real estate just because they freaked out over these baseless assumptions.
So, I want to lead with “There is no housing crash.” Yes, interest rates are going to continue to rise, but it doesn’t mean the end for the housing market. I want to give you some hard facts to back my claim.
CBS wrote an article titled “Federal Reserve issues warning about ‘brewing U.S. housing bubble.’”
The title sounds scary, right? But if you read through to the end, you’ll see them say, “There are a few differences between 2022 and the 2006 real estate peak that collapsed into a global financial crisis that took years to heal, the economists pointed out.”
They are saying the current situation is a whole different thing, so why won’t they lead with that?
It’s our job to read the whole thing through, not just the titles, and to not panic. Because once we get lost in fear, our decisions become clouded with emotions.
Fortune released this article with the title “What home prices will look like in 2023, according to Zillow’s revised downward forecast.”
They just revised their forecast and it wasn’t too bad because (as you’re going to see) they did a very good job. This is more realistic.
Fortune says, “Now, real estate researchers are dialing down their home price forecasts. On Wednesday, Zillow researchers released a revised forecast, predicting that U.S. home prices would rise 14.9% between March 2022 and March 2023. That's down 2.9 percentage points from last month when Zillow said home prices would shoot up 17.8% over the coming year.”
That statistic is not that bad, it is pretty high.
We also have CoreLogic jumping in and the article says “Over the coming year, CoreLogic predicts that home prices are set to decelerate to a 5% rate of growth. The Mortgage Bankers Association says home prices are poised to rise 4.8% over the coming 12 months, while Fannie Mae predicts home prices will rise 11.2% this year, and 4.2% in 2023.”
That is significantly lower than what Zillow says, and now everyone is revising their forecast.
Fortune also wrote an article focusing on what CoreLogic says, and it is titled “Watch these overvalued housing markets as home price growth begins to decelerate, CoreLogic says.”
And this was interesting to me because this is a data company for real estate.
It says, “The result? CoreLogic deems 65% of U.S. regional housing markets to be ‘overvalued.’ That includes major metropolitan statistical areas like New York, Miami, Seattle, Las Vegas, and Dallas. Every major market in Arizona, Florida, Texas, and Nevada meets CoreLogic's definition of ‘overvalued.’ Meanwhile, CoreLogic says only 26% of U.S. housing markets are ‘normal’ and just 9% are ‘undervalued.’”
When I initially saw this, I said to myself, "Overvalued how?"
If buyers are paying for it and the economy is thriving (except the inflation aspect), this world is not like the one before 2008. What criteria did they employ to determine if a market is overpriced, normal, or undervalued?
At the end of the article, they say, “But just because U.S. home prices are "overvalued" doesn't mean home prices are about to plummet.
Again, so why didn’t they lead with that?
Some good advice? Remain calm, even though you’re going to continue to see things like this. Don’t feed into the negativity.
The Housing Wire released two articles with titles that came as a surprise to me.
The first article is titled “Wells Fargo cuts mortgage jobs amid poor outlook.”
They also have an article about Fannie Mae that says “Fannie Mae cuts origination projection, forecasts recession in 2023.”
But right at the bottom, they say inflation might be reduced from 8.5% to 5.5% because the Fed is acting quickly.
“Fannie’s predictions show that, after peaking at 8.5% in March, inflation may be reduced to 5.5% in the fourth quarter of 2022. The unemployment rate is expected to reach 6% at some point in 2024, a change similar in magnitude to the 1990 and 2001 recessions,” says Housing Wire.
I want you to know that it is okay to buy right now. There is no need to wait.
Overvalued markets? That’s crazy. They can’t take the sentiment of the consumer and say “This is what’s going to happen because we know what they are feeling and thinking.”
Nobody predicted what was going to happen through Covid with real estate. Nobody’s going to accurately predict what’s going to happen now. It’s like a day-to-day thing that we need to keep a pulse on.
If interest rates continue to rise slowly, incrementally, and remain somewhere in the 7%, we’re okay. If they go higher, it’s a whole new story.
Just make sure that if you do decide to buy, you do so at the right time.
What will happen is that the market will relax over the next one to three years.
There will be no collapse.
So, stop jumping in and listening to these crazies who claim that the sky is falling (and the housing market is going to crash).