Nationally, home prices fell for the first time in three years in July, signaling to some that the housing market may be on the verge of a recession. Part of the reason for this anxiety is that this drop is the largest the housing market has seen since 2011, making it the biggest dip in the market in more than a decade. Combined with rising interest rates, high inflation, and an increasing amount of inventory, some economists believe that prices could decline even further in the coming months.
What is Happening in the Housing Market?
The housing market saw its first major decline since before the beginning of the COVID-19 pandemic, a drop of about 0.77% between June and July. This is the single largest drop in housing prices since January 2011, and an end to three years of continuous growth in the market. While this drop affected markets across the country, certain cities, like San Diego, San Francisco, Seattle, Los Angeles, and Denver all saw declines in prices of more than 4%, with Seattle and San Francisco seeing declines of more than 7%.
Why is This Happening?
A number of different economic factors have contributed to this decline in prices. First, more homes have been added to the market, increasing the amount of available supply relative to the demand and decreasing the competition for individual properties. In addition, rising interest rates have made mortgages and other loans more unappealing to potential home buyers, all while inflation is causing people to have less available income than they did previously.
What Are the Economists Saying?
Some economists are concerned about this downturn, seeing it as a potential sign of a recession in the housing market. As more houses are built and sold, there will be less reason for people to compete over the limited number of existing properties. Others, however, are more optimistic, and see the decline as a positive trend that will help to make homes more affordable for buyers. This, in turn, could help to spur demand in the market, leading to an eventual turnaround.
How Could This Affect You?
While higher mortgage rates and economic slowdown will weigh on the real estate sector of the overall economy, real estate markets are local and prices haven’t fallen as of yet on Long Island. If you are looking to buy a new home, a decline in home prices could help to make the property of your dreams more affordable. If you are looking to sell, however, it may be worth considering selling sooner rather than later, in the event that this dip turns into a broader recession in the market. Otherwise, you may not get as much from your property as you might have expected or hoped.
At Liongate Homebuyers, we assist our clients with a variety of services related to buying and selling real estate, including purchasing homes for cash. We have experience handling real estate financing, especially for developers and house flippers. If you are interested in selling your home for cash, please contact us at 516-548-6553, or visit our contact page.
