Year Over Year Prices Drop, Now What?

Dated: March 14 2023

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In a stunning turn of events, February 2023 saw a pullback on the medium price of 5.2 percent year over year. A year ago, we were told this could not happen. The myth was that we had such a small amount of inventory and that a pullback on pricing and demand was not likely. What we found out is that there are even fewer buyers than homes on the market. Despite low inventory, we dropped 27.1 percent in sales year over year. Top that off with a 96% increase in properties on the market and the local housing market is feeling some softening. The rollover from our peak values in May and June are now double-digit drops. So, look for this month-over-month trend to continue as we move forward into the Summer.

 

Zooming out we have seen a drop in mortgage applications nationwide. The lowest levels in 28 years. This is directly tied to much higher interest rates. To compensate for this, sellers continue to cut prices to try to offset it. But the constant news of an impending recession, and company layoffs keep buyers frozen. Not to mention affordability is the worst it’s been since 2007. The average consumer is not in a healthy economic environment. Car delinquencies continue to be at 2009 levels, credit card debt remains at all-time highs, and inflation remains stuck. All this ties back to housing and whether a buyer can afford it. After all, 68 percent of Americans cannot cover living expenses for one month if they lose their job.

 

Recessions take a longer time to play out than many people think. Most think one day you wake up and here it is. But we wade into recessions slowly using past data to try to predict future outcomes. Manufacturing remains weak, shipping worldwide is dropping, oil reserves are increasing, layoffs continue, and all these points toward further economic pain. The Achilles heel of this will be employment. If the FED can keep unemployment lower, we may see a softer landing. But if the economy starts shedding 100s of thousands of jobs and we end up pushing 7-10% unemployment the soft-landing dream will be dashed for another economic crash for the history books.  

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Patrick Muldoon

I have many interests and hobbies to supplement my busy career in real estate. Although I enjoy my work I also enjoy finding free time to enjoy the most important things in life. This includes being w....

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