By now, you've probably heard that the economy is not in great shape. Inflation is at a 40-year high, interest rates have doubled since early this year, and real estate prices have literally gone through the roof.
But what does this all mean to the average Georgian?
FOX 5 real estate expert John Adams joined Good Day to give real advice for a real estate recession.
The economy of the United States naturally expands and contracts. Expansions are a sign of prosperity, and usually last several years. If the economy shrinks two quarters in a row, that is called a recession, and it means we need to slow things down, hopefully just a little. We call that a recession, and usually lasts less than a year.
Right now, Adams says we printed and spent too much money way too fast because it was fun, inflation kicked in, and now the Federal Reserve is trying to slow things down just a little bit.
Currently, we don't know if we are in a recession or not, but as far as housing goes, Adams believes the real estate market is in a reset now.
- Interest rates are up
- Monthly mortgage payments are up
- Fewer buyers and renters can qualify, so housing prices should come down, but we still have a shortage of homes for sale or to rent.
Adams advice to consumers right now is you need to recognize that interest rates are going to stay in a range of 6% to 8%, perhaps for the next couple of years, and that is a more normal range. The super low rates we saw during the COVID-19 were subsidized to stimulate the economy.
Second, identify your length of occupancy. Adams says rent if you may move in four years or less and buy now if you expect to stay put for at least four years.
Adams' advice to buyers is marry the house, but date the rate. Plan on refinancing as soon as rates come down from current levels. Sooner or later, we will see another season of stimulus, and the Fed will lower rates. In the meantime, your home will likely be worth more than it is today. Look at ARMs and make your pre-approval letter match your offer, not your maximum borrowing power.
For sellers, reset your expectations to current market conditions. The days of 10 above asking price offers on the first weekend are gone. Furthermore, the buyers who are still in the market are very price-sensitive. Price your home realistically - consider paying upfront for an appraisal. And attract buyers by offering a prepaid 2-1 rate buydown.
The bottom line is the US housing market is finally starting to cool off a bit. But it has been so red-hot for so long that sellers are not ready to begin accepting less than full value in most markets. In other words, we are not seeing discounts off realistic asking prices, and Adams doesn't believe we will anytime soon.
In the meantime, it is still a sellers market, and we still have a serious shortage of homes being offered for sale.
Adams sees no reason for home prices to decline or for interest rates to drop anytime in the next 6 to 12 months. And no, he does not believe we will not see a housing crash like we did in 2008. Forget about foreclosures anytime this year.