fbpx

Are House Prices Dropping In 2022? | Bay Area Housing Market Update

➡️Are House Prices Dropping? In this video I share what is happening to house prices and inventory levels in the local real estate market during this interesting time. A time where mortgage interest rates have gone up to 6%, inflation is at its peak and rents sky high. I am sure we are all wondering: is this just a transitory time (a time of mental adjustment) in the Real Estate market or is the housing market headed towards a crash? Watch this video to find out how this market is different from the 2008 housing market. 

Video Transcription:

– We are in a very interesting time right now. We saw hyper-appreciation in almost every single market. And now, it feels like where things have just slowed down. So a lot of people are wondering if house prices are going to drop. As a local expert in real estate, I will do my best to answer that question, and also share some very important differences that I see now, compared to the ’08 crash. So you definitely wanna stay till the end of this video. So let’s get started. For those of you that watch my content, you guys know that I don’t believe in the doom and gloom mentality. I like to go off of practical local numbers, and that’s what we’re gonna talk about today. So let’s get right on the board. So here’s what is happening right now. Definitely, inventory, it has started to increase. And in some areas of the country or some markets, we’re also seeing price reductions happening from where the property is listed at. And in some cases, we’re seeing 10% drops. In some cases, we’re seeing 20% drops from list price to the updated drop price, but we’re not seeing a major drop in appreciation yet, on a mass level in this country, okay? And right now, we’re at 2.5 months of supply when it comes to inventory in the real estate. And for it to be an equilibrium or more of a balanced market, we need this number to be close to six months of supply. So we’re almost double that, that we need. So we’re still short on inventory. Number two, what we’re seeing, everywhere happening, is the interest rates are very high. They’re anywhere from the mid fives to the 6% for a first time buyer, with 5% down, 10% down. And a lot of people have just been priced out of the market, where they’re no longer able to afford. And in some cases, people are just not comfortable with that very high mortgage payment. And the third point, rents are very high right now. So that’s also keeping a lot of people still active in the market, looking, because if your rent is the same as your mortgage payment, or say a tab bit less in some parts or a lot of parts of the country, then it’s a no brainer, where a lot of people are still. So this is keeping the inventory moving. So all this said, there is a slowdown where homes are moving, but they’re moving very slowly. Days on market have increased in a lot of different markets here in the country. Also, what’s happening is, there are price negotiations happening. Like I mentioned, above price reductions are there. So if you are an active buyer right now, you probably have noticed that it’s much easier right now to get your offer accepted, as compared to, like say six months ago, because a lot of sellers are just unsure, are just not knowing what’s gonna happen in the future, so they’re aligning for pricing negotiations to happen. You’re seeing more seller concessions. Also, if you’re selling a property and buying another property where you’re now continuing upon the property that you’re selling, it’s much easier for you to get your offer accepted ’cause they’re just overall less movement in the market. I just wanted to take the time to say thank you all for stopping by and watching my content. If you can please like, and subscribe to the channel, to get more videos like this. And if there’s something I didn’t cover, or if something you disagree or agree with, please let me know in the comments below because I love to hear from you. Once again, thank you for watching. I love you all. Now, let’s move forward down the board, and look at how this market is different compared to the ’08 market crash, and then we can better understand and answer the question of where these prices are headed, and if we’re gonna see more price drops happening in the housing market. So if you could see here, are there three main pointers that I pointed out. Number one, right now, what we have is we have pretty much I would say, 95% of people that bought homes, they bought at a very, very low interest rate. And when I say very low, anywhere from 2.5 to the 3.5% interest, that range. And this was completely unheard of back in ’05, ’06, and ’07, rates were in the fives. People were getting homes with no money down, and a lot of them were just getting inestimable rate mortgages. A lot of foul practice happening. A lot of people just signing the paper, and getting a house. Where they really got a grip on that, and there’s no signs of that happening again. So the lending practices were solid this time. People have very low mortgage payments, and the rates are locked in for 30 years, okay? That’s the major difference from the ’08 crash. Number two, we are at 2.5 months of supply in inventory. When the crash happened in ’07, even prior to the crash, there was almost 12 months of supply on the market. So that’s another major difference. And number three, people have more skin in the game. Now, this pointer ties to the first pointer, where I was talking about the rates being really low, and people are putting money down, instead of just signing a piece of paper. Whereas now, people have actually vested in their property. There’s more equity in these homes, compared to where these homes were in the ’08 crash, just a lot more equity available. You may see Zillow and Realtor.com, and other websites like that, doing funny things where your house six months ago was, it was showing as estimate of $1 million, and now, it’s only a estimate of 950 or 960. Those websites are gonna do funny things, but on a mass level, we haven’t seen equity drops yet. Now, may we see them in the next year, the next two years, and how much we’re gonna see? We don’t know that yet ’cause real estate is a lagging number, but there are no signs of that happening on a mass level right now. So do I believe if house prices are going to drop? The answer to that, I do believe they’re going to drop, but I don’t believe we’re gonna see a major, major drop yet, from what I’ve discussed on the board. The inventory is still low, and the demand is definitely there. Now, I do believe we may see 15, to 20, to 25% in price drops, and see more price negotiations happening when you’re buying a property from where it’s listed at. Although I do believe that it is a little scary when you start to see consumer spending slow down. This is gonna impact the major businesses in this country. We are going to start to see layoffs happening. As a matter of fact, we’re seeing layoffs in a lot of different markets in this country, especially here in the Bay Area, where there’s a lot of tech companies laying off people. But I also believe that there are still lots of jobs available out there. And what’s big difference here, when I compared the ’08 numbers is, people have learned from the last crash. And since rents are very high, people are gonna do everything in their power to keep their homes, and not just allow banks to take them. So I don’t believe there’s gonna a major foreclosures happening, which can end up leading to a crash. So again, I believe the market may stabilize, and come to a more of an equilibrium, instead of a crash happening. That’s all I have for today, guys. If you found this video insightful, please don’t forget to share and like. And if you want more information about what’s happening, what the federal reserve is doing to manipulate and engineer this economy, to help us stay afloat and get rid of inflation, watch this video up top. Until next time, this is Karan Singh with Optimal Homes.

 

Related post

Leave a Comment

Your email address will not be published.