March 12th, 2023 11:29 PM by Andrew Liu DRE: 01109246 NMLS#249736
Although there are some price adjustment, nevertheless, home prices seem to be holding even as the mortgage rate has gone much higher. Market couldn't figure which way the price is going: is it the bottom now? or perhaps there will be more room for adjustment?
Home price will drop when the unemployment rate raise. Yes, there will be some homeowners could not afford the payment anymore, and their homes went foreclosure. On the other hand, this time around, unlike 2008 housing crash, most of the borrowers are very solid, and many of them put down at least 20% or more downpayments in order to compete to win the bid. With the low rates that they have locked in, it is very unlikely that the borrowers would just walk away.
One big difference this time compare to the down circle: for the last few years, corporate America has bought ton of single family home, there were hedge funds, RIETs, Equity firms purchased about 1/3 of all home sold in US in 2021. Since the rents were high and still high, they have made a tons of money. However, when the unemployment rate gone up, many of the renters can no longer afford the high rental amount, and corporations will like to start to withdraw from the rental market, and put the homes on the market to sell. When that happens, the housing market will tank.