So there’s a lot of doom and gloom in the economy out there and we’re hearing lots about a potential real estate market crash. So the big question is, will we experience a crash in 2022? If you are interested in hearing my predictions, check out my thoughts on the current market and where we’re going.
You pretty much have to have been living under a rock to not know that the real estate values in Montgomery county, Maryland have exploded over the last few years. Home prices and sales volume have reached an all-time high. However, there are certain factors that could affect the market’s future performance, including interest rates, inflation, job growth, and the overall economy. It’s difficult to make predictions about any market let alone the real estate market, which is notoriously volatile.
In this article, I’m gonna share some of the economical facts as well as some of the predictions I have so that you can make the best choice, whether you be a home buyer or home seller as we move forward. As of today, what I find is the market still does favour home sellers. However, it’s not nearly as favourable as it would’ve been at the beginning of the year. Say January through April. There’s no question with today’s higher interest rates. It has squeezed some buyers out, but diminished other buyers’ ability to purchase by up to 30 or 40%. However, inventory of homes is still historically low earlier in 2022, it seemed like in many of the markets, I was actually seeing 10, maybe even 15 buyers for everyone home today. It’s not nearly the same, depending on the market, depending on the price range, depending upon the location school district and many other factors, you can definitely see that the market is starting to balance out in the lower price ranges like $300,000 in under I’m really seeing no change in the market.
There still seem to be 10 to 15 buyers for every property. However, as you move up in price range, it starts to balance out a little bit more. I’m also starting to see that as properties are sitting on the market a little bit longer, the inventory is starting to go up. However, as of the time of this video, there still is an extreme shortage of homes for sale on the market. My prediction is as we start entering the end of the third quarter and entering into the fourth quarter, we’re gonna see inventory continue to grow and potentially demand. Start to pull back some which will create more of a balanced market. This may be the ideal time for home sellers who might be thinking about selling in the next year or two to potentially move up their plans to consider doing it. Now, prior to later, when values may fall, as far as home buyers go, it also could be a very good time for you to come out.
Because guess what? A few months back you are competing against 10 or 15 others today, you may only be competing against one or two, or maybe nobody at all as a buyer. When you have less competition, that will give you a better opportunity to not only get the house but potentially negotiate price and terms. This was something virtually impossible at the beginning of 2022. Lastly, I get asked all the time, Kevin is the bubble bursting. My response is I don’t think we’re gonna see a bubble burst. What I do think we’re starting to see right now is a pivot or a correction. What I’m seeing in today’s market is more of a plateauing of values, maybe going up a little bit, but definitely slowing down some. But what I believe is we’re gonna see a steadying of the values. We might see it fall back a little bit, but I do not see a flat-out downward spiral in our near future.
The reason I believe we’re gonna see more of a plateau of values, less a downward spiral or crash of the market is simple. Many of the home buyers who bought in the early two thousand were a part of that 07-08 crash. They purchased their homes with home loans. Now that we would consider being predatory, they were doomed to fail from the beginning. Many of those home buyers in that early 2000s period had no down payment. Their loans were not documented at all. They simply stated what their income was. There was no checking, no background checks on anything and they were stamped and approved. Many of these loans were also adjustable rate mortgages that were interested only. So when they’re making their payments each month, they’re paying nothing towards the principal. And guess what? Few years later, when the interest rate adjusted, they could no longer afford the home.
Many of these ended up going to foreclosure and also in the way of short sales, all of these distressed properties hit the market within a few years and absolutely flooded the market with inventory. There was way too much inventory and not enough demand. The difference is today, everyone that I’ve worked with for the last 15 years has gotten fully documented loans, strong down payments, as well as fixed rates at historic low rates. When the tough times come, people who have skin in the game simply don’t walk away from their homes and leave it to the bank to deal with. So basically what I’m saying is I don’t see the market getting flooded with a bunch of distressed properties. Like we saw back in 06-07 and 08. My advice to today’s home buyers is don’t bite off more than you can chew. Okay? Maybe you gotta set your expectations back a little bit on the size, maybe even the location of what you’re purchasing, just to be able to live within your means.
If you’re a current homeowner, I would also suggest that in today’s market that you don’t do things like go out and get equity lines on your home unless you really need to do it. And you’re smart about it. This is not the time to go on out, get an equity line in your home to go out and buy a boat or a Ferrari or anything like that. Be conservative. I do think we have some bumpy roads ahead, but I don’t see it being a crash. Now that you’re armed with more facts. What do you see happening in the real estate market as we go through 2022 and enter into 2023?
If you are considering buying or selling a home in Montgomery County, Maryland, or relocating to the DMV, and you want to chat, click on the link below to set up a time to talk.
