Waiting For Home Price Crash?

We have heard people say that they’ll wait for the elevated home prices to crash before they re-enter the market. A couple of factors work against this happening in reality and psychologically.

1. Home equity is too substantial for most homeowners to walk away from their homes in difficult times made them look for a way to get out of high mortgage payments. 42% of all homes are owned outright with no mortgage, home equity loan or reverse mortgage. This is a growth from 34% in 2011.

2. More than 40% of borrowers are enjoying interest rates below 3.5%. They can lease their home, or get creative with a wrap-loan sale if faced with a downturn in income.

3. As First American economist Mark Fleming stated in a January 31, 2023 article, price declines will continue across many markets, but those declines would have to be substantial to erase all of the equity gains accumulated by homeowners over the past few years.

4. Psychologically, most consumers follow trends based on the belief of security in numbers. Housing prices decline as the demand recedes, which leads to a further lessening of demand and further price decline until enough buyers feel ready again. This normally takes a regional or national recession of significance to keep the downward pressure on for more than a couple of years. The history of home prices in Orange County shows that the bottom is seldom recognized until a robust return to rising prices. Those waiting for a theoretical bottom often lack the confidence in the economy and their own income stability to buy when most people are not buying. This is true in the months preceding the bottom and the year of leveling prices.

Please give us a call at Premier Funding Network to answer any of your mortgage questions at 714-283-9900