Economic analysts are left scratching their heads with a housing market that most agree is in a downturn, but which does not seem to follow conventional signs on what a cooling housing market looks like. While the housing market did take a sudden downturn after the Federal Reserve changed its policy on interest rates, there are some oddities that have bucked normal trends. This has left some analysts wondering where the real estate market could go from here, as they get ready for the coming new year.
The State of the Housing Market
On the whole, the housing market is doing much worse than it was at the beginning of the year. Mortgage interest rates are approximately double what they were in January, thanks to the Federal Reserve raising interest rates to combat inflation, and demand has fallen significantly, causing prices to drop. At the same time, however, the amount of available inventory has remained small, and the number of foreclosures has not increased significantly.
Conflicting Economic Factors
The reason this is confusing for analysts is that a downturn in the housing market usually comes with a set of consistent factors: falling prices, more foreclosures, and more inventory entering the market as real estate investors and homeowners alike dump their property on the market. However, the low amount of inventory indicates that people are not prepared to sell their homes, and are generally able to make their mortgage payments, which is more indicative of a better housing market.
Why Analysts Are Baffled
Economic analysts expected a downturn when it became clear that the Fed would be raising interest rates, since higher interest rates make it harder to borrow money and, thus, take out a mortgage for a new home. While this had the expected effect of lowering home prices and limiting demand, it did not result in the kind of calamitous crash that many were expecting. Instead, there has been more of a slow decline, with some wondering if the market might not recover quickly in the coming year.
What This Could Mean for the Future
Right now, the state of the housing market is uncertain, and the future of the market is even more so. While some believe that the downturn is likely to continue for the foreseeable future, others think the market will rise quickly once the Fed’s strict monetary policy loosens. What happens is likely dependent on how the Federal Reserve and other financial institutions react to changes in inflation and other economic factors.
If you are an attorney assisting a client with a real estate transaction, you should contact the title insurers at Habitat Abstract. Our experienced staff will assist you with obtaining a title insurance policy that protects your clients and prevents unforeseen issues related to a defective title. Contact us at 1-888-99-TITLE (1-888-998-4853) or visit our contact page for more information.
