The Current Housing "Crisis" is Affordability

The Current Housing

There's a lot of speculation about a "housing crisis" that may or may not occur in 2023.  If you follow our blogs at you'll see that with all of the ground we try to cover, one of the most important has been and will continue to be housing affordability.  In a study released in December of 2022 by the Cato Institute as example, 55% of homeowners across the Country fell they couldn't afford to buy their OWN home in today's market!  Looking at sales activity regionally and nationally along with mortgage and re-finance activity has led many to believe that we are in (or are heading into) a housing crisis that will result in price corrections of anywhere from 15-30%.  If you read between the lines though, one of the most important things to realize is that we are simply in an Affordability crisis. 

There are numerous factors at play that led to and are perpetuating this crisis of affordability.  First and foremost is that the market created and absorbed a few decades worth of appreciation into a two-year window.  The Zillow┬« Home Value Index tells us that median price appreciation was approximately 43% from January of 2020 until December of 2022 across the US.  It seemed okay because of the panacea created by covid and the ensuing cratering of interest rates which in many cases offset rising prices.  Inflation has caused inventory to rise above historic lows, but not in any significant levels when compared to the pre-covid levels.

 Current inventory levels across the US are barely over 1 million total units, and considering the population now, that's a very real problem.  That combination of skyrocketing appreciation and the continuing absence of inventory has had little impact on prices which remain stubbornly high.  The other shoe that dropped during this time was interest rates, which had the largest single-year rate increase in over 50 years.  That created several different scenarios, none of which are good for potential Buyers and have not been well received by potential Sellers either.  High prices and even higher interest rates have reduced buying power by as much as 50% for the average person, leaving them "priced out" of the market...again.  It has also sidelined many potential sellers who don't want to have to find their replacement home at interest rates likely far higher than those they have currently.  In addition to the amount of re-sale properties remaining low, Builders have pulled the emergency brake as well.  

All of this has produced the lowest levels of mortgage credit availability in nearly 20 years.  Talk to your Realtor┬« and your Lender to make sure that whichever side of the fence you're on that you have a pan of action. It doesn't appear that the inventory issue has any immediate fixes in place which will keep prices elevated, so when interest rates finally begin to subside there's a good possibility that prices could escalate yet again.  Chance favors the prepared.    

Click Here to Read Article