The Centra Homes Blog
Economic Uncertainty Can Cause Hesitancy, But Don’t Miss Out!
May 8th, 2023
By Dale Wills, founder of Centra Companies
There’s a lot of uncertainty swirling around the economy right now with many home sellers hesitant to take on potentially higher mortgage rates, and home buyers and potential new builders feeling the same. And it’s no wonder they’re skeptical! Some economists say interest rates will stabilize, while others predict home prices will decrease. Plus, many are concerned we’re going to see a repeat of the 2008 Great Recession. However, if you’re itching to move or your family grew recently and you need more space, don’t postpone your decision to buy a new home or build one out of fear over the market. Here’s why.
The 2008 Recession
I often get asked, “Will we see a repeat of 2008?” It’s a valid question. Many people are still haunted by the last housing crash that started in late 2006, as millions lost their jobs, housing prices plummeted and foreclosures skyrocketed. Currently some analysts are saying there’s a recession on the horizon, while others anticipate a “slowcession” instead. However, no two recessions are the same, and today looks much different than 2008-09.
Housing is considered an economic marker when trying to predict when a storm is going to hit the economy. It’s a leading indicator in the history of tracking recessions, and although there are various factors that play into the economy’s well-being, such as the labor market and lending standards, one of the huge differences between then and now is housing inventory.
During those years, there was an inventory surplus, which is part of the reason why home prices dropped significantly. Today’s inventory, both locally and around the U.S., looks completely different with an incredibly limited supply.
It’s Unlikely Prices Will Drop
Another reason some home buyers and builders are hesitant right now is they’re assuming (and hopeful) prices are going to drop – but it’s unlikely we will see significant drops in housing like we saw in 2008. Many are comparing the office market to the residential market. However, the two are significantly different.
The office market’s price drop is due to employees’ ability to work remotely as many businesses are also growing a greater online presence.
In order for there to be a decrease in housing prices, labor and commodity prices would have to drop, which means we need to see negative inflation. Negative inflation isn’t impossible, but it’s certainly not as common. Prices could drop some but it’s unlikely prices will drop significantly over a short period of time due to a strong labor market and a relatively small number of foreclosures.
Interest Rates Fluctuate
Thirdly, it’s important to remember that interest rates fluctuate – they go up, and they go down. No one can predict what’s going to happen.
As interest rates plummeted over the last couple of years, there was a buying frenzy, and homebuyers got spoiled. Rates still aren’t as high as they have been in the past, and although they may not also be as low as they were two years ago, it’s a wise investment to buy or build now in case they increase. If interest rates go down, just refinance! But if you wait and rates suddenly climb, you’ll have missed a good opportunity. This is true for any buyer demographic.
It’s understandable if you’re hesitating to buy or build right now, depending on your current situation. However, try to remember the big picture: Your home is where your family is and where you create memories. Don’t postpone your decision because you’re fearful we’re going to see another Great Recession or hold off because you’re uncertain where prices or interest rates are going. Make the decision that is best for you and your family now.
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Posted in In The News