The 2008 market crash has etched on our memories forever. People lost their jobs; their 401(k)s vanished into thin air; it was complete mayhem, to say the least.
Fast forward to 2022: the rising inflation, uncertain economy, Russia’s war on Ukraine, and booming housing market have prospective home buyers reconsidering their purchase decisions. While many people speculate that there’s a housing bubble waiting to burst, experts have an optimistic view.
Analysts see it as a market correction, which doesn’t necessarily mean a crash. But it’s not a rosy picture either, at least for home sellers in big cities like NYC, Manhattan and Long Island, who might end up with pennies on the dollar in today’s cooling real estate market.
The Good News for Home Buyers
Although the mortgage rates across the US have soared through the roof, buyers are not backing down. Thanks to work-from-home opportunities, people are heading south to snag real estate at cheaper rates.
Who wants to live in a single-bedroom apartment in New York when they can buy a two or three-bedroom apartment at the same price in Florida?
This has led property sellers in big cities to lower their prices. And this might also be the most opportune time for on-site employees and doctors moving to California, New York, Manhattan or any big city to buy real estate.
Moreover, with easy access to a wide network of lenders, physicians and other high-profile borrowers can get the best mortgage interest rates in the city of their choice.
Buying Home from an Investment Standpoint
With remote corporate workers flocking to southern states, the housing market in tier 1 cities of Florida and neighboring states is expected to go up. Sounds like a suitable time to purchase a property from an investment standpoint.
On the flip side, the upward trend may indicate a housing bubble. Because the housing gains are hinged on the belief that the property prices will continue to rise in the future, buyers might get stuck with underwater mortgages if things don’t go as expected.
If you want to invest in real estate, it would be better to explore your options in the cooling market, such as New York, Long Island, California and Manhattan. Logic says that a $400k New York apartment down from $500k is more likely to go back up than a $400k Florida property going further up.
Should You Wait for the Right Time?
If you are hoping to snag a cheaper deal due to a potential downturn in the housing market, think again. Several analysts are betting that the market is quite likely to stay hot in the coming years, and here’s why:
It’s 2022. Millennials are loaded with dreams and aspirations, with GenZ right behind following in their footsteps. Millennials across the US are ready to strike off the first item on their ‘American Dream’ list, which is buying a house. Since most of them are first-time buyers, the excitement of buying a house often overrules the high property rates; thus, fueling the high demand.
Here’s some context to help you understand the correlation between demand and supply in the housing sector.
In a balanced market, it takes around 6 months to exhaust all real estate listings. In other words, the supply at any instance will last for 6 months. In 2022, the scale tips in favor of sellers with the supply averaging 1.7 months.
Strict Mortgage Policies
Compared to pre-2008 mortgage structures that collapsed like Jenga, today’s housing loan policies are stricter and more secure than ever. As a result, borrowers are not as likely to default on their repayments as they did in the pre-crisis period.
As long as the loans are being paid off timely, the real estate market will hold ground despite the precarious economic situation.
Although the Federal Reserves have recently increased their funds rate, which indicates a slowdown, it won’t necessarily affect mortgage loans. On the flip side, Goldman Sachs Group says there are 35% chances that the country will go into recession, putting the housing market in the crosshairs.
In a nutshell, if you have a stable job and sufficient funds in your bank account, you can take chances with your home purchase in 2022.