We all know the story. The pandemic hit the world, leading to lower mortgage rates and a greater desire for people to have their own space.
As a result, we all rushed to buy properties, causing one of the tightest property markets of recent years. But fast forward to more than two years later, and what’s happened?
Some figures suggest as many people as 75% regret their decision to buy, feeling they acted hastily based on pressure.
Reasons We Might See Falling Housing Market Prices
Could this be seen as an ominous sign of a crash in housing market prices? Here are five reasons why that could be the case.
1) What Goes Up Must Come Down
A recent Zillow survey showed that 75% of recent housing market buyers regretted their decision to purchase a property during the pandemic.
Why? The top reasons were buyers felt they didn’t have enough time to weigh up their priorities and options.
Realizing they chose the wrong location or ended up with too long a commute, or finding they didn’t take enough time to go with the right agent or carry out a home inspection.
The consequences of such a market were that many people ended up feeling cheated — Millennials especially thought they overpaid for their properties or didn’t get their money’s worth. In other words, the crazy market and steep competition put too much pressure on them to buy any house (and most likely pay over the odds for it) when they should have taken the time to make a more measured decision and find the right home for them.
So, is it time for the inflated housing market prices to come down now that so many of us have realized the pressure cooker environment made us go crazy?
The phrase “what goes up must come down” hasn’t proven valid for the housing market over recent years, despite what common sense would have predicted. During harsh economic conditions, unemployment, and prices rose.
Yet the survey results above suggest that things might finally be changing. Is it time for the market to stabilize?
2) Lower Supply of New Housing Market Buyers
Let’s start with perhaps the most obvious reason for a link between the house-buying frenzy and falling prices. Many people chose to buy houses during the pandemic means these people are no longer searching for properties.
As a result, surely there will be a lower number of people searching for homes, meaning demand will return to a typical point, and prices will either stabilize or drop?
The number of buyers is also likely to be low for other reasons.
Real estate investors may be reluctant to get involved in the market amid the current uncertainty. At the same time, the cost of living crises and high interest rates make it challenging for first-time buyers to enter into into market (which we’ll expand on shortly).
However, it’s unclear whether this will be enough to plummet prices, considering the low housing stock we still face.
3) Changes in Expectations
Why did people rush to buy houses during the pandemic in the first place?
One reason was the optimal conditions brought on by low mortgage rates, but another was the desire for people to own their own space.
Lockdown saw many of us end up more cramped than we would have liked and with less access to public spaces. That changed our preferences and encouraged people to leave cities.
As a result, demand and prices for bigger houses in more rural areas increased. Fixer-uppers also saw a surge in popularity.
But now everything has opened up again, things might be about to change, with regrets taking people back to the city.
This could mean that demand and, therefore, high prices return to the city areas that were previously avoided, but prices fall to the properties that seemed temporarily more desirable.
4) Buyer Burnout
You might assume that people regretting the homes they now own will mean that these buyers will be keen to get out and search for a property they won’t regret. Yet it seems that isn’t the case for a straightforward reason: Burnout.
Those who bought homes in the heights of the pandemic madness had to go through a lot.
Many of them ended up in situations where they were competing with countless buyers, making multiple offers only to get rejected, and possibly making offers they weren’t comfortable with simply out of pure desperation.
No wonder this led to regret in the first place — and no wonder they’re not thrilled about the prospect of going through all of that again.
Even those who weren’t involved in the experience directly might be reluctant to get involved after seeing the effects on people they know.
5) Changed External Conditions
It would be foolish to talk about real estate conditions and the possibility of falling prices without discussing what’s currently happening right now.
Mortgage rates are rising, the cost of living is also increasing, and uncertainty is growing — all of this means that conditions are no longer so great for buying a house.
If demand has already reduced due to the unhappy homeowners that are too burned out to buy another property, it’s set to fall even further from the numbers of people who may have been interested in purchasing a property but can no longer afford to do so.
Conditions are also likely to discourage home hunters that may have otherwise been willing to move again.
Final Word: Falling Housing Market Prices
We’ve been living in unprecedented times, and nowhere is that more clear than with the crazy real estate market we’ve seen over recent years. So, it would not be very smart to act as though we know what’s going to come of all of this.
Yet, given so many signs that prices might be finally heading downward, those who are on the fence about buying would probably be better off holding off for a while to see if prices do indeed decrease.
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Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. They are not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
The post Property: 5 Good Reasons We Might See House Prices Fall was produced and syndicated by Wealthy Living.
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