In this week’s Monday’s with Matthew episode, Windermere’s Chief Economist, Matthew Gardner discusses his thoughts in regard to the current housing market. What’s the number one question most homebuyers and home sellers have right now? “Are we headed towards another Great Recession?” Here’s what we can likely expect for the housing marker over the next year or so.
To begin, Matthew Gardner shares the textbook definition of a recession: “A difficult time for the economy of a country, when there is less trade and industrial activity than usual and more people are unemployed.” Despite seeing home sale prices pull back (on average across the U.S.) a little bit, he does NOT in fact believe we are in a housing recession. Here’s why:
1) Housing Supply:
We are still in a shortage of supply. Although, listings have increased overall, there are still not nearly enough homes to house every homebuyer. In some niche markets, data may point more towards a balanced or buyer’s market; however, we are still very much in a seller’s market. In 2007, the housing market peaked with 3.9 million units available. Today, we are 2.6 million units FEWER than we were in 2007. Which makes a housing market crash less concerning.
The data Matthew Gardner shares shows that we are headed towards a more realistic housing market. In 2020 and 2021 when interest rates were half of what they are today, there were far more eager homebuyers entering the market. As mortgage rates increased over the past year, homebuyers entering the market has slowed a bit. As of now, there is 3.3 months of inventory, in a balanced market, there would be 6 months.
3) Median Existing Home Prices:
Home prices started to pull back slightly at the beginning of 2022, which does not come as a surprise due to rising interest rates. Matthew Gardner believes prices are moving towards long-term trends and are NOT collapsing (like in 2008). Additionally, institutions like Fannie Mae, Freddie Mac, MBA and NAR all forecast interest rates to decrease modestly in 2023. Matthew Gardner also predicts that rates will not rise much further throughout the end of the year either. We haven’t seen rates about 6% since 2008.
4) U.S. Foreclosure Filings:
When you compare foreclosures today vs. during the Great Recession, they are very low. However, Matthew Gardner does think foreclosures will rise in the next coming months, but nowhere near the level of the last housing bubble. In Q2 of 2022, 48% of homeowners across the U.S. had 50% equity (or MORE) in their homes! For the state of Washington, that number was 63% of all homeowners.
In conclusion, Matthew Gardner believes that the pace of home sales will slow, but prices will not decrease. He goes on to say that homebuyers who purchase in today’s market will be glad they did so by year 2024. Median home prices will increase by next year (not at rapid speed like 2020 or 2021) but increase nonetheless.
“I believe we are in a housing reversion, not a housing recession.” -Matthew Gardner, September 2022
For more information on your neighborhood’s housing market, CALL/TEXT Realtor Jenny Wetzel (253) 381-9788 for a complimentary market analysis.