The Federal Reserve believes that the present housing market needs a correction. Jay Powell indicated that the level of appreciation is moving at an unsustainable level and was looking through Jed policies to reduce inflation within residential real estate. By raising the rate 75 basis points, the cost of borrowing money becomes a barrier to those who do not have enough down payment. But what is also having an effect is that rising interest rates will produce rising rental rates making housing across the board more expensive. The Fed believes that such a cooling down period is necessary, but this mitigates the effects of increased inventory which is going to slow down the appreciation of homes as more first-time buyers get into the market. Typically, Fed rate increases or decreases have the most dramatic effect upon the stock market. Right now we are obviously in initial phases of a bear market, but bear markets are predictors, usually forecasting the economic climate in the coming months.
The market is currently seeing a slowdown in the appreciation of homes into the single digits which is the first time in at least 20 months. The possibility of probability or a crash is limited. During the Great Recession home prices fell by more than 30%.
It is going to take a while for inventory to be replenished, and at these levels with housing prices for a single-family home above $400,000, there are still bidding wars in certain areas but these are not as common. There are most likely going to be sellers who will be forced to reduce their prices when they realize that buyers are not capable of meeting such high thresholds. According to Redfin, the average US home sold below its list price.
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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