One of the biggest problems that homeowners and investors were faced with, before the market collapsed in 2008, were assumptions that the housing market would never slow down. While we are well off of 2006 levels, the current housing recovery has left investors optimistic that real estate will continue to make a steady climb. What was once assumed just a few months ago, now looks like anything but a guarantee. Housing confidence has slowed among prospective buyers and home sales and inventory are both down. While no sign of a collapse is imminent, the housing recovery may take a lot longer than the experts predicted.
Between rising interest rates, changes in government backed mortgage programs, rising home prices and decreased inventory, buyers have cooled on the prospect of owning a home. While employment numbers have improved, there is increased fear of the financial bottom dropping out and forcing families to continue renting. Until the large pool of renters and first time homebuyers get involved with the housing recovery, there will not be significant signs of improvement.
People are always going to buy homes, but with foreclosed and banked owned property sales declining, there are less “deals” out there than in years past. Prospective buyers are still working on strict budgets, either for themselves or to follow lending guidelines. If they can’t get the perfect house or the perfect deal, they are opting to wait until it comes along. Lending guidelines do not appear to be changing any time soon and interest rates have already started creeping up. Home prices are still below historic levels and buyers have still not flooded the market.
The market should continue to inch along the path of slow growth. If you are counting on appreciation, you should temper those expectations for at least another six to twelve months. The market will rebound, but it is just going to take a little longer than everyone expected.