Crash or Rebalance? Insight on the Current Housing Market from Industry Experts

With the rise of inflation, the cooling of home prices, and the increase in interest rates in the U.S., it’s no wonder the present and future state of the housing market is top of mind for a lot of people.

“The reality is we’ve had over 125 consecutive months of [home] price increases – that’s over 10 years. We’ve gone somewhat single directionally over the last decade,” RE/MAX President and CEO Nick Bailey explains as to why the current market shift may seem radical to some.

In reality, industry experts see the current market change as an act of balance, not a crash.

On the latest episode of Keepin’ It Real with Nick Bailey, guests Ward Morrison, President and CEO of Motto Franchising, LLC, and Selma Hepp, Deputy Chief Economist with CoreLogic, share insight on the housing industry through their respective mortgage and data-driven lenses.

What’s happening in housing?

Hype surrounding market change attracts a negative connotation, but Morrison explains that the current change is a restoration to balance.

“Everybody out there is calling [the current market conditions] a ‘new normal.’ I call it a ‘normal normal.’ We’re getting back to sort of a stable market [and] a balanced market,” Morrison says. “We’re going to see an increase in inventory, which is great.”

From the mortgage perspective, he shares that tighter lending standards help ensure current homebuyers are making a home purchase that is sustainable for their lifestyle.

“[Tighter lending standards] means that unlike in the past where [lenders] were very, very loose, we become normal and really qualify a person to make sure they can get into the home [and] they can stay in the home,” Morrison explains.

Hepp agrees that market normality isn’t just on the horizon – it’s already here.

“We’re seeing [fewer] buyers out there, which is bringing down the level of competition and so we are seeing, as Ward said, more normality in the market,” Hepp says. “The share of homes selling over asking price is coming back [down] to pre-COVID levels.”

How are mortgage rates impacting consumers?

Morrison provides clarity on the relationship between an interest rate hike by the Federal Reserve, and the increase of mortgage rates that often follows.

“When [the Fed] ups [interest rates], it does not directly correlate to the mortgage rates. Mortgage rates are more tied to the 10-year Treasury. They’re still going up, they just aren’t directly going up one-for-one with the Fed funds rate,” he says.

He advises homebuyers to get used to rates that are slightly higher than those of the past few years, noting these rates, which are still relatively low, are potentially helping create balance in the housing market.

Morrison also suggests buyers do a cost benefit analysis when shopping for homes.

“It’s that rent-versus-buy scenario, because even though mortgage [rates] are going up in cost, rent is going up in cost. As a consumer, I have to decide where I’m going to spend my money. Am I going to spend that on rentals, or am I going to spend it on building equity, building [an] investment, and building a long-term asset?”

Is the U.S. in a housing recession?

Hepp says an economic recession does not automatically create a housing recession. The circumstances, she believes, are variable – but housing can be tied to economic change in certain markets due to its influence on consumer spending, from homes to furniture to adjacent services and more.

“Historically, when we saw a recession happen, it was preceded with a housing decline. So that’s why a lot of times, people are talking about housing leading the recession. It does not necessarily have to happen,” she explains. “It didn’t happen in all the previous recessions. But the problem is that housing is a huge contributor to the economic activity in the U.S.”

The best way to tackle a changing market as a homebuyer or seller, regardless of the economy? Bailey believes it’s with the assistance of experienced professionals.

“The most important thing that I believe both buyer and seller need is a really good agent and a really good lender to know exactly what’s happening,” he says.

To learn more current market insight from those leading the industry, tune in to the latest episode of Keepin’ It Real with Nick Bailey.

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