The Impending Housing Market Crash

The pandemic saw an astronomic boom in the real estate sector as the lockdown forced people to work from home, opening up the choice for Americans to buy homes in choice cities, take rentals for their vacation, and many AirBnB getting filled.

Investors latched onto the booming markets, prices of homes skyrocketed and buyers were happy to pay for them at the low rates presented to them. Lush spending of newcomers also drove up inflation in their new cities.

As the effects of low rates and monetary policies metamorphosed into an inflation crisis, the housing sector has been worst hit by inflationary measures. To stem the rising inflation, the Fed consistently raised rates this year, leading to higher mortgage rates, lower home purchases, and a reduction in the values of available homes.

Rising Mortgage Rates

Mortgage rates rose to a 20-year high above 7% in October 2022, a staggering double of what it was in January. The direct impact is the stifling of home demand and a cooling off of home sales to about 30% compared to January.

Rising mortgage rates continue to impact homes with fixed mortgage plans and those with adjustable mortgage rates.

Existing holders are likely to keep their homes shorting supply, and volatile rates mean new buyers get to pay as high as $2500 monthly as compared to $1500 in January.

Lower Prices, Lower Value

The continuous tightening of the economy through rising interest rates has resulted in houses selling lower than they were a year ago. Even though prices are still high, an increasing mortgage rate is dealing a blow to the number of home sales.

Statistics showing declining home sales from the National Association of Realtors show:

• Homes were on the market up a median of 33 days, an additional 25 days from last year
• Home sales were down about 19.9% from last year
• Mortgage applications were about 39% lower from last year
• Sales of existing homes were down 28.4% year over year

Lower home sales are leading to lower prices of homes which could hurt the value of existing homes. Buyers believe homes selling for lower than their former prices have lower values causing more problems for sellers in the long run.

No New Buyers

Buyers have refrained from jumping into the housing markets at the moment due to the volatility seen so far in 2022. It is predicted that mortgage rates will stay above 6% through 2023, still leading to higher amounts paid for a home after capital.

Builders have shifted focus from new single-family homes to home renovations on two points.

• Buyers are more likely to go for rentals at the moment than purchase new homes at high rates.
• Homeowners are keeping their homes and prefer to raise the values through more renovations which has its own downside in the long run.

Real estate investors are biting their fingers as tightening fiscal policy meant to combat inflation continues to drive up interest rates, turning away buyers and reducing the value of existing homes.

Expected to Get Worse

Things are expected to worsen as an impending housing crisis might shadow the whole of 2023. The number of new homeowners might shrink beyond the points currently seen.

Money spent on home renovations to drive up home values continues to impact sellers putting players in the housing market in a tight situation.

Despite calls for calm by the Fed, analysts estimate a double figure decline in housing.

As Chief economist at KPMG David Swonk puts it

“Once you start the process of prices falling nationally, there is a self-fulfilling momentum to it because no one wants to catch a falling knife,”

“We’re easily going to see large double-digit declines. I think 15% next year is very conservative. We’re already turning.” He continues.

Planning Your Investment

A downtrend from pandemic-level highs in most sectors of the economy has characterized the economic landscape of the year.

With inflation reaching heights not seen in years, the Feds hiking rates, and a threatening recession call, this isn’t the best of times for the average investor.

It is important to ensure safe and wise distribution of your investment so as to avoid the devaluation of your assets having a negative impact on your retirement plans.

Choosing stable investments that are immune from inflationary pressures and tight monetary policies is a way to ensure your retirement funds are kept safe towards your planned future.

Think Precious Metals

Physical assets such as gold, and silver have retained their intrinsic value across varying economic times, at times outperforming other investment assets providing the best option for securing your retirement.

Precious metals are a time-proven inflation hedge that keeps you insulated from the volatility in markets such as the real estate sector.

As the probability of a recession becomes more pronounced, it is important to ensure that your retirement savings exist where they are not impacted by the negative trends that are to come.

A precious metal IRA is a sure way of keeping your assets safe and secured.

We are committed leaders in the precious metal industry and our brand thrives on trustworthiness. To begin the journey to safeguarding your retirement reach out to us at (888) 615-8047 or fill out the form on the right side and get your FREE Guide for Investing in Precious Metals.