Is the housing market more mercurial than Kyrie Irving?

Not really. Some of this is predictable.

2020’s supply crash helped lead to 2022’s sales volume crash.

The number of home sales are down 28% just from the start of this year (chart).

Why have sales sunk faster than the acting careers of Dane Cook, Will Smith, and Lindsay Lohan?

With low supply and so many owners locked into low payments, this sharp volume drop was almost inevitable.

Per Redfin, 85% of homeowners with mortgages have a rate under 5%. Many have a rate under 3%.

That’s why so many homeowners hesitate to let go of properties, further constraining available supply and crimping sales volume.

It’s a nationwide “lock-in” effect.

Though the market is slowing due to: low supply, higher mortgage rates and the season, this plunge in new listings keeps home prices stable.

Though supply and sales are down, some sensationalists appear to call for a bad housing price crash because it generates clicks.

It likely takes a catastrophic event to trigger a real estate price crash, like a distressed seller, circa 2008.

No price crash is expected. Why?

  • Existing homeowners can afford their low, fixed mortgage payments. Inflation can’t touch it either.
  • Borrower loans are well underwritten. They have good credit and assets.
  • Strong employment.
  • Record homeowner equity to protect.
  • It takes oversupply. Again, there’s not enough inventory.

The delinquency rate is low and downward trending.

Despite the slowdown in buyer activity, homes that get listed sell quickly.

Days on market are 13-23, depending on price. In a more typical market, it’s 45 days, per the NAR.

Now that we’ve established the crash in sales volume, let’s address three questions about housing’s future.

In 2023, could prices fall in some places?

NAR Chief Economist Lawrence Yun expects zero or minor changes in price next year, with increases or decreases of no more than 5%.

The only exception is California, he says. That’s where the market could see 10% declines because it’s so expensive.

Over the next five years, he expects national appreciation to be 15-25% in total.

TBH, in reality, the NAR can give some pretty rosy predictions. They often encourage home ownership.

But I think this evaluation is reasonable. Bankrate CFA Greg McBride generally concurs too.

What will rents do with inflation and an economic slowdown?

They’ll likely rise. I recently answered why here.

What about 2023’s mortgage rate direction?

They’re 6.95% now.

We all know that they have more upward pressure. But I rarely make specific mortgage rate predictions.

In my opinion, they’re harder to forecast than house prices. My omniscience is finite. I’m outsourcing this one.

That way, someone else can be wrong rather than me.

The President of a top national lending company will give me an exact prediction of the rate peak—to the nearest 1/8% of a percent and when—on next week’s GRE Podcast.

Thought getting your money to work for you creates wealth? It doesn’t! That’s a myth. My one-hour investing video course is now 100% free: Real Estate Pays 5 Ways. For a limited time, you can learn how wealth is really created, here.

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