Home Prices are DROPPING FAST - The 2023 Housing Crash STARTS NOW!
Home PRICES are DROPPING FAST! The 2023 Housing Crash STARTS NOW!
You might have noticed home prices are dropping fast. With the FED’s aggressive rate hikes freezing the real estate market, it looks like the 2023 Housing Crash starts now!
Many economists forecasting home price appreciation earlier this year are quickly downgrading their monthly reports every time the FED says BOO!
Top Housing Markets Slowing Down
Let’s look at the housing markets losing value faster than cryptocurrency! This analysis is courtesy of a recent Redfin post.
In their report, Redfin found 20 major metros bouncing down the rabbit hole toward home price depreciation.
This study ranks the changes in the year-over-year housing market stats from February 2022 to August 2022.
Now it’s going to get a bit nerdy here, so bear with me so you can see the total value of what comes next.
The results are analyzed using the Redfin Compete Score, which shows an area’s competitiveness on a 0 to 100 scale, where 100 is the most competitive.
We’ll clue in on two columns. The first one is the change in price per square foot, or PPSF for short. The second is the change in the sale-to-list ratio. This column reflects the percentage of what a home sold for vs. the list price for a property. Essentially, did it sell for more or less than the list price? That’s what it shows.
To keep this post short, sweet, and savory, we’ll look at the five hardest-hit real estate markets before moving on.
5 Housing Markets Slowing Down the Most
Leading the herd, #1 Seattle, WA, drops -17.7 points in PPSF, with a list-to-sale ratio of -10.1 points.
Next is Las Vegas, NV, where I live, work, and play. Again, we’ve seen -14.5 points in PPSF and homes dropping -4.6 points from their list price-to-sales price.
#3 – San Jose, CA, loses -17.6 points in PPSF, shedding -14.7 points on their list price to sales ratio since Feb 2022.
#4 – Sunny San Diego, CA, clocks -15.8 points off their PPSF, losing -6.1 points from their list price to sales price.
Rounding off the top five list at #5 is a tie between Sacramento, CA, and Denver, CO.
Sacramento gets sacked with -17 points on their PPSF while letting go of -4.6 points off their list price to the final sales price.
Denver freezes -12.2 points off their PPSF while chilling -5.7 points from their list price to sales ratio.
As we can see, some of the hottest places to move over the past couple of years are cooling off rapidly.
Housing Market 2023 TAKES FORM
Naturally, with significant changes come big questions that need to be answered. For example, how does such a hot real estate market go stone cold in just a few months, and what does that mean for us going into 2023?
Is it all doom and gloom, or is there an opportunity amidst the chaos? That’s a matter of perspective, and we’ll talk about it in just a bit.
Lawrence says the “housing sector is the most sensitive to the Federal Reserve’s interest rate hikes, and the softness in home sales reflects this year’s escalating mortgage rates.”
According to Mortgage News Daily, the current mortgage rates are at 20-year highs coming in at just over 7%!
George Ratiu is the manager of economic research with realtor .com. He had this to say about the impact of mortgage rates on today’s homebuyers. “The buyer of a median-priced home, at today’s rate and using a 30-year mortgage, is looking at a monthly payment that is almost $900 higher than a year ago, which adds more than $10,000 to the yearly financing burden.”
Because of the high home prices and soaring mortgage rates, it’s like someone pulled the emergency brake on the housing market. This is causing a significant slowing in the real estate market.
In a recent post by CNBC, they found:
“Sales of previously owned homes fell 0.4% in August from July to a seasonally adjusted annualized rate of 4.80 million units.” The data comes from the National Association of Realtors, or NAR for short.
This represents “the slowest sales pace since June 2020, when activity stalled very briefly due to the start of the pandemic.” To put it another way, it’s the slowest pace since November 2015.
Maybe that’s why we’re seeing so many housing report downgrades, like this one from Zillow.
They now suggest homes will appreciate by 1.2% through August 2023. For reference, this marks Zillow’s 6th housing market downgrade for 2022.
To be fair, Zillow is not a lone wolf calling for a very slow rate of home appreciation in 2023. Joining their pack is CoreLogic, which projects a 3.8% increase in home values for 2023.
In stark contrast, Ian Shepherdson, the chief economist for Pantheon Macro, is of a different persuasion.
Ian said “he expects a “sustained decline” in the sector through next spring, with prices falling as much as 20% from their peak by the middle of next year.”
The Upside of Shifting Housing Markets
Because of news like this, we’ve seen many people become increasingly worried real estate is about to bottom out, and they fear buying a house in a down market.
That’s fine. People will believe what they choose to believe anyways—just being a realist.
That said, the serious buyers and sellers that look past the noise will have an opportunity. In part because many others are at the beach looking to catch the wave on the way to the crash.
Between you and me, depending on their point of view, they will be there for a very long time waiting for the big one that won’t come – I hope they brought some sunscreen and something to eat.
No, the opportunities in the market won’t come easily, but if you plan it out, it will be worth it.
Keep in mind, with every downside is an upside of shifting housing markets.
For instance, both new home builders & sellers are offering more reasonable incentives or amicable negotiations.
Did you know many builders have dropped their prices or are offering incentives? Some include lower mortgage interest rates. Yet others are open-minded to helping with your buyer closing costs—something to think about and consider.
Likewise, home sellers realize the era of insane bidding wars is over for the most part. So, sellers, there is still an excellent opportunity to sell your house. However, you’ll need to temper your expectations to reality and be reasonable. If you have unrealistic expectations, you’ll miss the boat and wish you had taken action in the future.
So, I ask you not to buy into the hype. The market is not where it was in 2008 by a long shot. But, yes, the housing market is undoubtedly due for a price correction.
But the nonsense out there about 50%+ price drops, waves of foreclosures, and it being the worst time in a generation to buy is a bunch of BS.
Time reveals all. You’ll see what I’m talking about when it does, just like in past videos I shared about predictions, forecasts, trends, and even live streams during the onset of the pandemic.
But to be very clear, a housing correction is coming for many housing markets.
And no, a housing crash is not the same as a correction.
For one, “housing crash” is a negative trigger word to cause fear and impulsive action – even if an action is to get a click on a video or to prey on your fear to sell you the “solution.”
However, a "housing correction" is an optimal term because it is true of the current situation. In most cases, it does not cause a primal trigger in your brain, resulting in an impulse decision.
Additionally, a housing correction also accounts for facts & metrics, including housing affordability, supply of homes, housing demand, economic health on the local, state, and national level, job opportunities, wages, and the cost of living to name just a few.
So, if you want me to explain more about this, let me know in the comments. I’m delighted to separate truth from lies.
Thank you so much for reading this post! I'm sending you positive vibes everything goes your way! - Andrew Finney
Disclaimer: At the time of writing, Andrew Finney, S.0173260, is a real estate salesperson with King Realty Group (KRG) in Las Vegas, NV. Andrew's videos and blog posts are his own and do not necessarily represent the views and/ or opinions of KRG.