It’s difficult to understand how our economy could have changed so quickly and how the price of everything is increasing seemingly hitting every part of our life from the price of gas to a loaf of bread. Inflation is being blamed for increases everywhere including the continuing price of homes and the rising mortgage interest rates.
If you have been watching the news even casually the chances are you’ve seen or heard some headlines or ‘talking heads’ discussing the housing market. The problem for most people is how to sort through all the rhetoric and separate the FACT from FICTION.
FACT: The real estate market is shifting, and when that happens, it can be hard to understand what and why things are happening and what affect it may have on you if you as a buyer or a seller. That’s where a trusted real estate professional with years of experience can help sort through the news and bring perspective so you can really understand today’s market and what it means for you.
Also, the market is shifting differently across the nation and the shift in our DFW area does not correspond to what is happening in other states because our economics are different due to high employment and the number of corporations that are continually moving into our area creating more jobs and more demand for housing. Many people are reading or listening to reports that discuss the overall state of the industry from a national level – a sort of average of highs and lows across the nation which is not representative of the DFW area.
This ‘broad based’ reporting on the national level can lead to misconceptions and misunderstandings if one tries to apply the conclusions to this area. Here are three common housing market myths you might be hearing, along with the expert analysis that provides better context.
Story #1: Home Prices Are Going To Fall
A myth that many home buyers may have seen or heard is that home prices are going to crash - the housing bubble is going to burst. Headlines, for sake of brevity, often use similar terms to describe what’s happening with prices. Some of the headlines you may be seeing right now include: ·
Appreciation, or an increase in home prices or market valuation.
Depreciation, or a decrease in home prices or market valuation, and
Deceleration, which is an increase in home prices or market valuation, but at a slower pace.
FACT: economic experts aren’t calling for a decrease in prices, but quite the opposite, they are forecasting that appreciation will continue, just at a decelerated or reduced pace. That means home prices will continue rising and not fall. Selma Hepp, Deputy Chief Economist at CoreLogic, explains: "higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
As we have learned, we have one of the most resilient housing markets in the country due to the influx of new jobs and our overall economic growth. The DFW area has seen its fair share of rapid price escalation and low inventory; however, what is happening in another state does not mean it is happening here.
Story #2: The Housing Market Is in a Correction
Another common story being told is that the housing market is in a correction. Again, that’s not the case. Here’s why. According to Forbes: “A correction is a sustained decline in the value of a market index or the price of an individual asset. A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.”
FACT: home prices are still appreciating but at a slower Year-Over-Year (YOY) pace as noted above, and real estate market experts and economists project this to continue. That means the housing market is not in a correction because prices are not falling. What we are seeing is the rate of increase moderating compared to the last two years, which were record-breaking in nearly every way.
Story #3: The Housing Market Is Going To Crash
Some headlines are sensationalizing stories that the housing market is a bubble ready to burst and creating a lot of needless worry and concern.
FACT: experts say today is nothing like 2008,and those of us that were in the real estate industry at that time can attest to this fact. Two significant reasons why we are in a much different market today than in 2005 – 2008:
There is a material difference in the amount of equity people have in their homes today which creates resilience that did not exist in 2008. According to the Texas Real Estate Research Center, the home values increased in the DFW area on average by more than 73%. The Wall Street Journal reported in June 2022 that U.S. Home Equity Hits Highest Level on Record—$27.8 Trillion!
The mortgage industry lending standards and qualifications are much more strict today due, in part to widespread lending policy changes throughout the industry. Logan Mohtashami, Lead Analyst forHousingWire, explains: “As recession talk becomes more prevalent, some people are concerned that mortgage credit lending will get much tighter. This typically happens in a recession, however, the notion that credit lending in America will collapse as it did from 2005 to 2008 couldn’t be more incorrect, as we haven’t had a credit boom in the period between 2008-2022.”
During the last housing bubble, it was much easier to get a mortgage than it is today – remember the zero-down payment, and “no docs” loans, no credit verification, which allowed nearly anyone to get a mortgage. These loans were destined to create problems and they did which, according to most accounts, is what led to the 2005 – 2008 collapse. Since then, lending standards have tightened considerably and purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the 2005 – 2008 crash.
Bottom Line - No matter what you’re hearing about the housing market, trust an expert like Geni Manning with 40 years of experience in the DFW real estate market. She is a recognized leader in the real estate industry in North Texas, and has been featured in magazines: Texas Realtor, Plano Profile, and is D Magazine’s ‘Best Real Estate Agent.’ Geni is a popular guest on radio as a real estate expert and a featured speaker at community events. Simply put, Geni is a Master of Residential Real Estate.
When you have a knowledgeable authority on your side that knows the ins and outs of the market, including current trends, historical context, and so much more you can be more confident in the decisions you are making. Give Geni a call today at 469-556-1185.