The U.S. is mired in a “very unhealthy” housing market — here’s why and what you can do about it, this real estate analyst said

The U.S. is mired in a “very unhealthy” housing market — here’s why and what you can do about it, this real estate analyst said

This real estate analyst said that the United States is overwhelmed by the housing market
The U.S. is mired in a “very unhealthy” housing market — here’s why and what you can do about it, this real estate analyst said

Is the housing market officially on ice? Or move quickly toward a deep freeze? Although there is no official standard for a mortgage recession, make no mistake – skyrocketing mortgage rates and dwindling supplies are sending shivers through this vital sector of the US economy.

When mortgage rates topped 6% in 2022, the country saw a historic decline in home sales.

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At the end of the summer, real estate analyst Logan Mohtashami of HousingWire warned that 8% was not far behind — a potentially prohibitive rate that would fuel a “very unhealthy” market for buyers and sellers alike.

With interest rates remaining in the 7.5% to 7.75% range so far in November, how did we get here? How do you navigate the incredibly difficult and expensive real estate market in a strong economy?

Why is the housing market struggling?

The housing market in the United States has been in a state of volatility for many years. Mohtashemi’s description of the market may seem harsh, but it aptly highlights the basic conditions facing both sellers and buyers:

Supply and demand imbalance. There are simply not enough homes available to meet the demand from potential buyers. The shortage is driving up prices, making it more difficult for first-time and first-time buyers to purchase a home. Mohtashemi says higher interest rates make matters worse because they trap buyers and sellers in a “waiting game.” For buyers, the challenge is clear: higher prices and rates equal higher monthly mortgage payments.

However, remember that higher prices are great for sellers – that is, until they become buyers too. This factor keeps many potential sellers on the sidelines and inventories low.

Construction and labor shortages. The construction industry is grappling with the double whammy of rising material costs and a shortage of skilled construction workers and subcontractors. This has led to delays in house construction and renovation, further limiting the supply of new builds and older homes.

House prices rise. Home prices have soared, outpacing wage growth for many Americans even in a hot job market. This poses significant obstacles for individuals and families trying to save for a down payment. Even those with lots of savings and excellent credit scores will find they’re facing high rates — whereas they may have scored a much lower rate just a year ago.

Competition and bidding wars. Limited housing supplies force buyers into bidding wars, driving up prices, frustrating losing bidders, and scaring others out of the home sales market.

Read more: Ultra-rich Americans are snapping up luxury properties overseas as the US housing market declines – but here’s a sharp way to invest without having to move abroad

What you can do about it

Even with all of this working against them, potential buyers have options to improve their purchasing power.

be realistic. If you’re in the market to buy, set reasonable expectations as to location, size and how much you can really afford. In addition to what any lender says you qualify for, you need to realize that you may not find the home of your dreams in the price range you want. Prioritize your needs and prepare to compromise.

Obtain prior approval. Mortgage pre-approval gives you an edge in a hot market. Sellers are more likely to take your offer seriously once you have it because it shows that you are a committed and qualified buyer. A pre-approval letter will also help you better understand your financial limits.

Discover down payment assistance. Research down payment assistance programs that may be available in your area. These programs can help first-time buyers bridge the gap if their savings are less than the required down payment through cash grants, low-interest loans and tax incentives for qualified buyers. You may have to do some research and paperwork, but a $25,000 grant to fill out the application is still a pretty sweet deal.

Focus on financial health. While access to home ownership faces an uncertain future, focusing on your current financial health by paying off debt and increasing your savings can put you in a better position financially and mentally. Once the market rebounds in your favor, you will be in a more stable place to begin your homeownership journey.

Consult specialists. Real estate agents, financial advisors, and mortgage brokers can provide valuable insights tailored to your specific situation. There are programs that offer free financial advice, so even if you’re tight on money, don’t be afraid to seek out experts and ask for help. These organizations include the Financial Planning Association (FPA), which provides free financial planning to underserved communities through volunteer advisors.

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This article provides information only and should not be construed as advice. They are provided without warranty of any kind.

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