Over the past few months, we’ve seen a notable shift in the US housing market. Home prices are finally slowing down after years of seemingly endless growth. As the housing market begins to cool, it appears that a correction of some sort is in store.
How will this correction affect the real estate market?
First things first, a correction is not a crash. During a correction, home prices return to more normalized levels of buying and selling. They don’t fall suddenly and dramatically as they would in a crash. To put it simply, things balance out. We see this locally with longer days on the market, fewer showings, and lower prices.
Will this correction lead to a housing crash?
According to Mark Zandi, chief economist at Moody’s Analytics, a crash is unlikely. Here’s why:
1. The number of vacant homes is at an all-time low. Vacancy rates reached historic highs prior to the financial crisis that triggered the Great Recession more than ten years ago.
2. The quality of mortgage underwriting is high. The majority of loans are “basic” 30 or 15-year fixed-rate programs with little indication of the subprime or negative amortization activities that sparked the foreclosure crisis.
3. While some markets are marked by speculation and flipping, nationwide the evidence for flipping is low.
How hard will this correction hit our local housing market?
In the latest episode of The Shawn and Matt Show, we discuss a market crash versus correction, an HOA suing a homeowner for $40,000 over a few inches, and a Realtor that attempts to trademark body language.
