Realtors: Housing Market Correction Not Looming
The ebb and flow of the real estate market are expected. Homebuyers and sellers witness inevitable peaks and dips. Historically, events aided the ebb and flow. Most recently, the coronavirus pandemic resulted in many changes in homebuyer trends. Coalescing demographic trends, government policies, and supply-and-demand imbalance resulted in soaring home prices and fierce competition in the housing market.
People wonder if a housing market correction — a period of declining home prices that is likely to continue for at least a few years — is in motion. Some experts posit the inevitable correction; however, others use statistics that indicate otherwise.
“The last six months have been difficult for the real estate market as mortgage interest rates topped 7%, pricing out many consumers,” said Jessica Lautz, deputy chief economist and vice president of research at the National Association of Realtors. “Today, rates are under 6.5%, and buyers are tired of waiting on the sidelines. Finally, February sales showed an early spring in home sales activity and the strongest year-over-year growth since July 2020. Prices are flat nationwide, allowing buyers in some markets to negotiate power rarely found throughout the pandemic.”
However, the supply-and-demand issue won’t allow too much dip. Since inventory is short, potential buyers will still have to compete. Even homebuilders can’t quench demand quickly enough, although Bankrate’s chief financial analyst, Greg McBride, said supply and demand will eventually balance.
Bill White, associate broker with Howard Hanna Real Estate, said that the residential real estate market in Jackson County indicates an abundance of buyers in what he refers to as “the sweet spot price range of $150,000 to $250,000.” He said that price range is seeing the same trends.
White said new listings are down 23% year over year, average sales prices are off 8.8% and closings are down 15.8%.
“The rapid increase in interest rates from sub 3% to 7%- plus caused people to pull back, but are for the time being settling below 7%, which is the historical norm,” he said.
Similarly, Michigan real estate broker Derek Bauer said the real estate climate in Michigan still favors sellers. Moreover, Bauer said he does not foresee any event that would cause a market correction since supply and demand are so far removed.
“Even if the supply picked up by half, we still would not be in a buyer’s market. So even if prices pulled back 5% to 20%, I don’t see that causing any alarm,” he said.