Should You Buy a Home Now?
Buying a house in 2024/2025 is no easy decision. And there’s a few who might tell you “Are you Crazy?”
The economic and financial markets are in turmoil with confusing news and signals. Volatility is a warning. Even the housing experts are confounded about what’s going to take place in the next 4 months. It’s very complicated.
Millions of Millennials are eager to buy a townhouse or single family house. Unless prices fall, it won’t be happening. Because as you’ll see below, mortgage rates won’t fall enough and down payments and mortgage payments simply aren’t affordable.
Something has to change in order for prices to fall and actual sales transactions to happen. Homes are listed with no buyers.
The likely catalyst for a price drop will be pressure on sellers that hits critical mass. They simply have to sell.
But we don’t know which month. Certainly, Nov 8th will be a turning point. A vote for the Democrats is a vote for the status quo, including maintaining high home prices. After all, a lot of voters are homeowners and they want to protect the value of their real estate investments.
The sentiment and political bias toward preventing home price drops is very strong. It’s politically unpopular in an election year.
Record Low Transactions
Currently, we’re hitting record lows in home sales. This market is stagnant.
You’ve heard about the glut of listings of late, and hoping you might work that in your favor! Yes, the glut might be a time bomb for sellers who’ve held out stubbornly for their price, or to get their own miracle refinancing deal. Lots of nervousness about mortgages coming due in 2025/2026. Without lower rates, it could be a blood bath for sellers.
Economists say the US economy is strong and there’s no risk of recession. However, that strength makes it tough for the FED to cut. Inflation lingers. A Trump victory in the white house could send the US economy soaring and thus your dream of a cheap home is ended.
In this video Diana Swonk believes the FED will cut 1% this year, but that would likely restart the inflationary fires.
When Will Home Prices Fall?
The latest NAR Realtor home price report shows houses hit an all time high of $432,700 in June. If you view the home price chart below, you’ll note the zig zag rise of housing prices and it’s likely we’ll see the next zag this fall and winter. It’s consistent as clockwork.
In a Yahoo Finance interview, Piper Sandler chief investment strategist Michael Kantrowitz spoke of rising unemployment as a tell tale sign of a recession looming. Stocks prices on the Dow Jones, NASDAQ and S&P fell strongly as he spoke on Thursday, not knowing stocks would fall again today, Friday by even more. The point is that investor and home buyer illusions are being shattered. As more bad news hits in August, we’ll see more illusions dissipating.
Seller’s Mood is Changing as We Enter a Buyer’s Market
However, with a weakening economy, rising unemployment against inflated, unaffordable home prices, the tide might be turning for a price drop in the next 3 months and certainly next 6 months. Sellers are listing. We’re seeing a wave of listings and it should pick up in August, September and October as more owners can’t refinance their mortgages affordably.
As discussed in the stock market report, from the interest payments on national debt to falling tax revenues to the treasury’s desperate need to pull in money, lower rates aren’t certainty.
Recessionary Trends Hard to Ignore
As in the stock market today report, ISM manufacturing is down and big corporations are showing earnings weakness. Unemployment is rising.
Last year and up to now, homeowners didn’t have to sell. They held and held, and still prices rose. If economic conditions slip into recession however, their situation changes drastically. It’s painful for locked-in mortgage holders and they may need to sell when they can’t refinance. A recession this fall could tighten eligibility from the banks, so a lower rate is a moot point.
Will a forecasted .4% rate drop in the next 12 months help your dream of buying a home?
This chart from Trading Economics shows home prices on average doubling over the last 10 years.
Buyers probably need to review what happens at the end of a hyperinflationary period, and how house prices are affected. Because most housing market analysts are overly certain that low supply will ensure home prices can’t fall. There are catalysts for a housing market crash and stock market crash. Understanding those signals is critically important before you put your buy order in.
Barbara Corcoran Believes Prices are Set to Rocket Next Year
Perhaps Barbara Corcoran still believes home prices will rocket next year, and that’s not out of the question. We know for sure, sales are going to grow — so the question is, will mortgage enabled buyers be willing to bid up in bidding wars? Right now, the likelihood of asking prices falling is high, and likely to match up with what buyers can actually afford. Pending sales are down.
Homeowners who sell right now could be unloading at the last minute as buyers get antsy about committing in this uncertainty. Yet, few economists believe we’re headed into recession, and when a slide begins, it’s difficult to stop. Some feel the FED is too late.
Either Way, It’s Time to do Your Research
If next summer of 2025 is the best time to buy, then you’re wise to start planning and doing your research.
It doesn’t hurt to search for a Realtor on Google, check out their character and learn a little about them and their sales skills and give them a call. Each Realtor will have unique ideas on your local market and how they can help you acquire your next home. It’s wise to speak to many, because too often buyers and sellers impulsive work with the first real estate agent they see. Take your time and find a Realtor that looks genuine and wants to work with you.
Regardless of the time period, getting clarity on where you want to live, where the homes will be listed, and what type of home you want is important.
Could the Housing Market Collapse?
There is the potential for a market collapse despite the massive huge demand for homes this year. The key here is the FED, who just kept the central rate level, might not bring it down quickly. It’s possible, with inflation sustained and the governments revenue problems, that the rate might only decline 1% next year. The FED is a really tough spot between a rock and a hard place.
The future fed funds rate might depend on who wins the White House. President Trump would push for lower rates, lower taxes and deregulation to get the housing market moving again. It would be hard to find a Realtor or home buyer that didn’t agree with that idea.
As mortgage holders can’t refinance cheaply, more homes will be offered up for sale. Prices keep rising despite a flood of homes becoming listed. And over August, September, and October, sellers will be listing in huge numbers.
“We’re seeing a slow shift from a seller’s market to a buyer’s market,” said NAR Chief Economist Lawrence Yun. “Homes are sitting on the market a bit longer, and sellers are receiving fewer offers.”
Sales last month dropped last as the graphic below shows, while inventory for sale rose 3.1% just in one month and is up +23.45 vs 12 months ago.
As political and economic events play out in the second half of this year, buyers and sellers will gain more clarity.
A good guest at this point is that home prices will fall as locked-in sellers jump at the opportunity to unload their property. Buyers will buy as long as prices comes well down.
Good luck with your home buying strategy.