If there is one thing you can count on in the real estate market, it is change. So, should we expect anything different in the coming year? No. But, do the rising mortgage rates, limited supply of homes for sale, and elevated home prices mean that there will be a housing market crash in 2023? That answer is also probably no. However, signs indicate a shift from a seller’s market to a more balanced market is underway. Read on to learn what we know about the housing market’s future as of early fall 2022.
Recap of the 2008 Housing Market Crash
Those old enough to remember the impact that the housing market crash of 2008 had on the economy don’t want to repeat it. After all, that crash coincided with the biggest recession since the Great Depression. The government seized banks widely believed to be too big to fail, including Washington Mutual. The U.S. government also had to take over Fannie Mae and Freddie Mac. All told, as many as 10 million homeowners lost their homes to foreclosure.
We now know that incredibly loose mortgage requirements, which drove the subprime mortgage industry to unprecedented highs, were largely to blame for the Great Recession. Fortunately, stricter loan underwriting guidelines have ensured this doesn’t happen again.
Signs of a Real Estate Crash
Opinions vary on warning signs of a housing market crash. Still, most experts agree that at least some of the following occur:
- Home prices plateau or soften
- Interest rates rise
- More inventory (homes for sale) becomes available
- Consumer confidence declines
- Less demand for homes for sale
- Downturn in the overall economy
- Increase in foreclosures
Where the Housing Market Stands: Autumn 2022
Indeed, some generally accepted warning signs of a housing market crash can be seen in autumn 2022. For example, interest rates are up. On September 15, 2022, the 30-year fixed mortgage rates surpassed 6%, a rate that hasn’t been seen since 2008.
Foreclosures have also increased in 2022. As of this writing, foreclosures are up 153% from last year. Even still, foreclosure filings remain significantly below historical averages.
Likewise, other warning signs of a real estate crash are not occurring. For example, consider that the median Oregon home value in 2022 is $507,388. The forecast for the median home value in 2023 is $592, 122. This marks an increase (not a softening or decrease) of nearly 17%.
Regarding the economy, despite inflation, there are no significant signs of a downturn when looking at the unemployment rate. In the fall of 2022, unemployment remains near historic lows at 3.7%.
Fewer homes are being sold in Oregon in 2022 when compared to 2021. But the median number of days a home spends on the market is only 16. As recently as 2019, homes were on the market for an average of 60+ days. This means there is still an incredibly high demand for homes.
So, what should we expect to see from the housing market in 2023? At this point, it looks to remain a robust market. However, buyers are likely to have a bit more leverage than they did during the peak of the pandemic, when homes were frequently getting multiple offers, often thousands above their asking price. Bidding wars may cool off. Home buyers may not worry that insisting on a home inspection will hinder their chances of having their offer accepted.
In other words, it looks like we may return to a more balanced housing market next year. If you’re planning to buy, keep in mind that mortgage rates are subject to change daily.
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