Where’s Housing Headed?
Sellers have been reaping the benefits of a bloated market, quickly unloading homes that are often priced at the top of the market. In states like Florida and Texas where people have been migrating in droves following the pandemic, buyers have had very little to choose from and often bid over the asking price out of desperation to get into a home.
Now we are starting to see the market take a turn. Moves by the Fed to drive down inflation have sent interest rates soaring from 3 to 7% or more with the promise of more increases as we head into November and beyond. So far, higher rates have not helped inflation and prices continue to go up for many everyday items, especially food.
Home sales have slowed down significantly and as rates increase, fewer buyers will find the idea of buying a new home appealing. The unfortunate outcome for sellers will be that home prices will decrease.
If you want to sell, and profits on homes will be substantially lower, how much do you want to invest in the repairs to get your home ready to put on the market? Now you really need to think about how much value a repair or upgrade will add to the home.
Small jobs, like retiling your floors, are popular remodeling projects because you can completely alter the look of a room for a few hundred dollars, depending on the type of tile you choose and if you have the skills to install it yourself.
You’ve seen it on many a television home show. The prospective buyers walk around the house and comment about how much work is required to rip up carpet or refinish a floor. The truth of the matter is these are easy, cosmetic fixes. When repair requiring you to move beams or rip out and replace pipes or dig under the foundation, then you are talking about major projects. Tiling, painting and simply cleaning up your home can go a long way to add appeal for that first impression.
Periods of downturn can last a few years. As we move into the new year, reports of fourth quarter sales in January will be key indicators of the market health. Despite the bad news, we continue to see the stock market hold high, as though it were ignoring all the indicators.
People will always need somewhere to live. Now with costs to rent rising beyond affordability, the home buyer must weigh whether he or she is better off investing money into a home. If prices decline, the buyers will have to decide whether the lower priced homes balance out the higher interest rates. (One can always refinance the home later when the rates go back down again).
As we head into winter, home sales tend to slow down in the northern states. Come spring, when new homes for sale come on the market, their price points should be good indicators of what the housing market expects for 2023.