The real estate market is in a seriously bad way. Prospective home buyers face roaring prices, soaring mortgage rates and often inadequate supply.
So it’s no wonder that new home sales slid 8.1% in June from May, to an annualized pace of 590,000, according to the latest federal government statistics. That level marks a two-year low, and it’s the fifth straight monthly decline.
In other recent housing news, rental information service Zumper’s National Rent Index hit a record high in July. The median one-bedroom rent totaled $1,450 in the month, up 2% from June and 11.3% a year earlier.
Meanwhile, many economists see strong odds for a recession within the next 18 months. Ben Mizes, chief executive of education service Clever Real Estate points out in a commentary that a recession could help the housing market long-term by pushing prices down.
The median existing-home sales price hit $416,000 in June, jumping 13.4% from a year earlier, according to the National Association of Realtors. That represents 124 straight months of year-over-year increases, the longest streak on record.
In any case, Mizes offers several recommendations on how to handle the housing market during a recession.
Postpone Selling Your Home If You Can
“The market is already slowing down, and it’s projected to slow down even more once the effects of higher interest rates spread through the economy,” Mizes said .
“With fewer buyers out there, selling your home over the next year could be difficult, and you might be forced to cut the price, perhaps multiple times, before you find a buyer. If you can wait a few years to sell, it’d be worth the wait to catch the recovery.”
If You Want to Buy, Tidy up Your Financial Profile
“For buyers who are waiting to look for a home once prices cool, it’s going to be important to present a pristine financial record to your lender,” Mizes said. “When mortgage rates go up, banks become pickier about who they give mortgages to.”
Mortgage Rates Will Fall With Inflation, and They Aren’t so High Historically
“Mortgage rates rose as a result of the Federal Reserve increasing interest rates to tame inflation,” Mizes said. “If the strategy works and inflation comes down, it’s safe to assume that mortgage rates will come down too.”
And if you can’t wait to buy a home, remember that “today’s elevated 30-year fixed mortgage rate of just over 5% isn’t that much higher than the 4.6% rate of late 2018,” Mizes said.
If You Have Cash, Seek Opportunities
“With mortgage rates elevated, there will be significantly fewer buyers on the market, and sellers will get desperate after their home sits on the market for weeks or months,” Mizes said. “In this situation, a buyer with cash has the leverage to negotiate a great deal.”
