If you are following real estate news coverage lately, you may have seen or heard some headlines that do not paint a full picture of the current real estate market. While a market shift is occurring, these headlines only speak to a small portion of the overall real estate trend. This can make it hard to distinguish fact from fiction. This is where your trusted real estate professional can help give you the facts on the current shift and help you really understand the real estate market and what it means for you.
Two of the most common misconceptions or myths about current market conditions are listed below, along with analysis that provides improved context.
Myth 1: The Housing Market May Crash
Some headlines are generating worry that the housing market is a bubble ready to burst. This is the most egregious of the myths, but experts say today is nothing like 2008. One of the reasons why is because lending standards are very different today. Logan Mohtashami, Lead Analyst for HousingWire, explains:
“As recession talk becomes more prevalent, some people are concerned that mortgage credit lending will get much tighter. This typically happens in a recession, however, the notion that credit lending in America will collapse as it did from 2005 to 2008 couldn’t be more incorrect, as we haven’t had a credit boom in the period between 2008-2022.”
Beyond these lending practices, in Southern California there is a serious shortage of housing. For years new home developments have failed to build to keep pace with need. According to the Legislative Analyst’s Office of California, keeping pace with need will be a monumental task, despite the recent increase in new housing starts.
“…to avoid extreme price increases, the state should have been building 70,000 to 110,000 more housing units beyond what it actually built in each year from 1980 to 2010. Summed over the whole 30-year period, this shortfall comes close to the 3.5 million new homes California needs by 2025.”
Read more on California’s continued housing shortage at: www.ppic.org/blog/new-housing-fails-to-make-up-for-decades-of-undersupply/
In truth, almost all experts aren’t calling for a decrease in median home prices. Instead, they forecast home prices will continue to rise, just at a decelerated pace. Selma Hepp, Deputy Chief Economist at CoreLogic, confirms:
“. . . higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
Myth 2: The Housing Market Is in a Correction
Another common myth is that the housing market is in a correction. Again, that’s not the case and really is a bit of a misnomer. Here’s why. According to Forbes:
“A correction is a sustained decline in the value of a market index or the price of an individual asset. A correction is generally agreed to be a 10% to 20% drop in value from a recent peak.”
As mentioned above, home prices are still appreciating, and experts project that will continue, just at a slower pace. That means the housing market isn’t in a correction because prices aren’t falling. What is actually happening is prices are just moderating compared to the last two years, which were record-breaking in nearly every way.
Bottom Line
It is important to get the big picture view of the current housing market. Many news outlets and news sites use shocking language to get attention, however the truth can be uncovered by looking at market factors and what the actual experts are saying. There is no better way to uncover the facts behind the headlines than speaking with a local expert. At the Jelmberg Team we strive to keep a pulse on market trends including current conditions, historical context and so much more.
If you’re curious about what your home could sell for in today’s market, check out the home value calculator link or QR Code below, which takes into account recent Coachella Valley sales https://jelmberg.team/home-value
