The Big Short?
I watched The Big Short the other day for the first time in about 5 years last night. If you’d like to keep an optimistic view of the housing market, I highly recommend NOT viewing that for a while. It’s a great movie, but it was hard to fall asleep after watching it. I just felt like there were a lot of similarities between the 2007 market and the one we are in now… Then I woke up and tried to get one of my buyers approved for a loan and was quickly dropped back to reality.
One of the quotes from the movie is, “Well, my firm offers NINJA loans – no income, no job. I just leave the income section blank if I want. Corporate doesn’t care.” Buyers today are having to jump through what seems like endless hoops to get qualified. They get their employment verified twice at a minimum. Debt to Income rates are looked at with a magnifying glass. It can seem like a real uphill battle.
Also, the mortgage loans that the average American has right now are mostly low risk and a majority of homeowners have a good amount of equity in their homes. Very different than 2007.
Still, I’m as worried as the next guy about where the market is headed and eager to see how long we must wait to get back to a normal, balanced market. We need to focus on mortgage rates. As I write this, we are looking at your average home loan costing you around 6.5%. This along with the dramatic price hikes from the last 3 years and record inflation leads us to a very slow market and declining prices.
It’s Not All Doom & Gloom
Just like we said in one of the last CalZone videos, our median price for August only dropped about 1.5%, putting us a little over 6.5% up from this time last year. I’m not sure where the prices are going to be for September, but I’m guessing we will drop anywhere from 2 to 6 percent month to month putting us at or below where we were for September last year.
We are getting closer to ‘normal’ numbers in the categories of “median days to contract” (32) and “months supply of inventory” (3). We had 437 closed sales in August and only about 600 new listings.
While rates are high, buyers are having some fun out there right now. There is little competition and lots to choose from. Sellers are starting to open their eyes to the fact they may have to accept less than they think their home is worth OR offer up credits to buy rates down if they’d like to sell (if you have questions about this, give me a ring or watch the CalZone episode where we talk about 3-2-1 Buy Downs).
I believe we have another couple hard months ahead of us, but the hot spring season is just around the corner. We are going to have to watch what the government does and keep a close eye on inflation and mortgage rates.
If you have any questions about the value of your home currently or want to talk more in depth about the market, please hit me up! I’ve definitely got time to chat.