The biggest barrier to prices going down is that sales are needed to prove it.
Back in the old days when we had foreclosures, the banking rules forced lenders to keep selling their REOs, regardless of price.
But who or what is going to force regular homeowners to sell for whatever the market will bear? Anyone who needs money can borrow against their sizable equity, and virtually everyone who can’t get their price today will blame it on everything but their price (“I have comps!”) and wait for a sunnier day.
How bad will sales get?
Here are the NSDCC sales counts from recent months of July:
We’ve only had 103 NSDCC sales this month, with a week to go plus late-reporters.
Sellers get a vote in this process, and they can choose to not sell – and create the Big Standoff.
Will Sellers blink in the Spring of 2023??? I doubt it. Jobs, Interest Rates, and Stock Market will dictate house prices next year. If the Federal Reserve will truly fight inflation, rates will increase significantly, which will tank the Stock Market and cause a Recession. Hard to say how far they will go to “fight” inflation. The “Owners” want inflation of assets.
I’d imagine the other barrier is simply inflation. Prices are rising for nearly everything, including wages.
Ironically borrowing at 5.5% is now lower than 9% inflation. A little over a year ago inflation was more or less neutral with mortgage rates.
Might actually be a good buying opportunity this fall. Later on refinance if rates drop in this recession.
How bad will sales get?
You have no idea!
Just keep an eye on the inventory skyrocketing in the coming months.
All those houses purchased as vacation rentals are deep in the red, it will be worse than subprime.
If you’re trying to make sense of the North San Diego County coastal real estate market, you should probably get off twitter or wherever you’re reading this kind of doom.
If there should ever be a significant drop in real estate prices, BlackRock and other institutional investors will have their multibillion dollar bazookas ready to buy everything in sight and outbid any individual investors looking to cash in on the bonanza!
If you don’t have to sell because you’re losing your job or facing financial ruin because you used your home as an ATM and borrowed more than you can pay back (we all remember a lot of our neighbors suddenly parking giant RVs and boats in their side yards in the early 2000s, yes?), then if your home’s estimated value isn’t enough to make you want to sell, you just sit back and don’t sell.
The real value of your home isn’t set in stone until you actually decide to sell it for that amount.