The sharp and fast rise in mortgage rates this year led to only slow and modest decreases in real estate sales prices. As a result, housing affordability is at its lowest level in 30 years. Predictably, the number of sales completed declined rapidly.
The logical forecast is that sales transactions will remain sluggish, making this a tough time for Realtors, mortgage companies, and anyone who needs a new home. Sellers are unlikely to reduce prices sharply enough to spur the market and buyers are less likely to meet these price levels.
Breaking out of this pattern will likely require: 1) a change in mortgage lending practices, 2) government intervention in home ownership programs, 3) a lowering of interest rates, 4) an increase in real individual buyer earnings, or 5) a major recession impact on the economy to change seller behavior. We will see. I don’t expect to see much of any of this.
The predictable response of real estate investors is to refocus their efforts to look for distressed property sales. This market is already over saturated. I receive inquires almost daily as an owner/manager. We see little opportunity here.
My investors’ strategy will be to build real estate value outside of an ownership agreement and secure their investment with a convertible mortgage that effectively delays the purchase while locking in a gain.
I will continue to focus on the lowest priced eastern coastal areas that stand to gain over the long term as governments learn to cope more effectively with the effects of climate change.