brown concrete building under white clouds during daytime
There’s all kinds of advice being given about how the present real estate market is going to handle another disruption: this one being the record inflation and consequently the escalation of the 30-year fixed mortgage rate. But looking back over the last 15 years, we see that every market doesn’t just fall out of bed, it takes years to get where it goes and years to give up some of what it gained.

We seem to have forgotten that the market crash of 2007-08 took three years to materialize within the real estate market. As we saw between 2007 and 2012, home values fell on average 5% annually. And then between 2013 and 2019, the average home gained 3% in value annually. What happened during the pandemic was and is clearly an anomaly. We will now have to navigate the catastrophic inflation that is being forced upon the economy and devaluing not just the dollar but also the assets in the stock market. The Dow Jones has fallen from a high of 36,000 to under 30,000 over the last couple months. That is enough to make anyone consider or reconsider their investment strategies.

Market Red Flags
We must put what happened in the past not only during the pandemic but the years preceding the pandemic within a parenthetical bubble. As we recall we were emerging from an economic crash not only in terms of the housing market but the stock market. The Dow Jones Market Index went from 8,000 in 2008-9 to over 36,000 in 2022.

The rampant inflation will clearly cool off the housing market to the degree that the number of homes will remain at the current levels. There will also probably not be the bidding wars that there had once been.

Another encouraging factor is that the FICO scores for the average homeowner currently are at a record high. People had been leveraged to a greater degree than they are today. Also technically speaking, in the pocket of many homeowners sits $11 trillion collectively in equity. This is a 34% increase in 2022 over 2021, according to Black Knight Research. Also, back in 2011, when we were in a very deep recession, one in four borrowers were underwater in their home loans. Today that number is almost nonexistent, coming in at 2.5% where borrowers have less than 10% equity in their home. Of course, this can change if the housing market depreciates at the same level that it appreciated, but chances of that happening are very, very small. And addition, mortgage delinquencies are very low, with just under 3% of all mortgages past due.

If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.

Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.

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