Welcome to the June 2022 edition of the Suburban News.
The market has shifted from irrational to more rational. The slowdown means the Fed's rate hikes are working, cooling demand in an overheated market. JP Morgan reported inflation is now peaking and expects it to decelerate through the rest of 2022. The risk is that Fed policy is too aggressive in aiding that along, resulting in economic growth slowing too abruptly and tipping the economy into a recession (when there is less demand and then the prices for everything will come down). If we follow historic trends, real estate continues to be a good hedge against inflation as property values over time stay on a steady upward curve.
More borrowers are paying fees to cut their interest rates and making higher down payments to lower the amount they must finance. Many who may have sought a 30-year fixed rate mortgage are now opting to lock into adjustable rates for shorter periods. The average homeowner owns their home for about 16 years which is about half of the 30-year traditional mortgage.
In the past few weeks, the market has slowed down. In Westchester, we have felt it but not as dramatic as some other areas. The sentiment of many agents around the country as it pertains to the state of the real estate market have, "We were going 90 miles an hour down the highway, and now we took our foot off the gas. The buyers just stopped buying, It's a completely different market now". We have absolutely seen a shift, but there are still many buyers out there that still need a home.
Public sentiment seems to be nervous with the massive losses we have seen in the equity market, gloom-and-doom about the economy, constant recession and inflation talk, rising prices and costs, more lockdowns, war, and an energy crisis. Buyers seek stability when making big decisions and purchases. Sellers have their lives wrapped up in their homes. Sometimes this causes a divide. The seller that hears stories of over bidding and sales that happen in a matter of hours vs. the buyers whom are watching their stock portfolios shrink in value, may not be as willing to pay 10% more than yesterday, when there are economic signs that inflation may have peaked, and inventory choices are growing. By acknowledging all these factors, both sides are more educated and can better come to a meeting of the minds. Acting is so much better than re-acting and understanding both sides is essential.
Members of Generation Z - those born between 1997 and 2012 - accounted for 10% of home buyers across America’s 50 largest metro areas in 2021. Many are looking outside expensive metro areas to find more affordable homes in midsize cities.
Arms are Making a Comeback!
Rising Rates are squeezing homebuyers, but mortgage-industry executives said there is little reason to fear a repeat of a meltdown. Today’s loans and borrowers are much safer than they were in the pre-crisis years, when lenders made loans with ultra-low teaser rates to subprime borrowers on little more than their word. The type of borrower that’s qualifying for these ARMs today is significantly different from the borrower profile we saw qualifying back in 2006 – 2008.
Energy prices will soar 50.5% this year after nearly doubling in 2021. The rise in energy prices has been the most significant since the early 1970s.
I think we're in the midst of a Great Rebalancing where all markets that seemed to have spiraled too far too fast based on unprecedented demand and under-estimated preparedness combined with excess cheap capital to fuel this demand are finding their new, more calm, more balanced footing.
