It’s said that markets hate uncertainty. Funny thing since both the housing and stock market is rife with uncertainty and turbulence. What is certain is this, home values are much higher than they were ten or twenty years ago. Were there some bumps along the way like a housing bubble or a recession? Certainly. Another certainty is occasional instability, unbalance, and an eventual correction.
Case in point my neighbor down the street. About two months ago he stopped by and mentioned he was selling. I wished him well and waited for the eventual disappearance of the ‘For Sale’ sign posted in his yard. One month later he happily announced he had found a buyer. “Congratulations”, I said.
As the weeks passed I noticed something. The sign was still up. Going to Zillow I see he dropped his original asking price by $20,000. Still no sale. Then last week he slashed the price by another $20,000. It’s a beautiful home in a very desirable neighborhood. What happened? Quite frankly, it’s none of my business. However, you could put good odds that rising mortgage interest rates may have been the culprit.
Homebuyers are facing an outright affordability crisis. Median home prices have surged over $120,000 since May 2020 and have not substantially dropped from their all-time highs while skyrocketing mortgage rates have added an average $800 to a 30-year mortgage payment. Add a dash of 9.1% annually-adjusted inflation to the mix and my neighbor’s home price reduction shouldn’t come as a surprise, and neither should the other price reductions in your town.
Market resets are the normal course of business in the wake of central bank manipulation, the fear-driven buying that follows, and the eventual pullback of easy money and low-interest rates. Wash, rinse, and repeat. The good news is unlike the 2008 housing crisis mortgage lending standards were actually used to determine a borrower’s ability to repay the loan, which means a free fall in home values is highly unlikely. What is likely is a correction which is exactly where we find ourselves today.
While it’s alarming to see home values drop in your market, unlike traditional mortgage brokers you offer the only mortgage that solves a host of retirement complications without requiring any monthly principal and interest payments, perhaps even eliminating them altogether. The loan that many once rejected may be considered once again thanks to inflation and stock market losses.
While your neighbor’s home prices may be dropping your local older homeowners’ interest in a means to fund their retirement and solve cash flow problems is not.