The wild ride continues in the housing market!

This past week, the Fed raised interest rates, but mortgage rates fell, and we learned that we’ve now had two consecutive quarters of negative GDP, but aren’t necessarily in a recession.

What in the world is going on and how is this likely to impact the housing market?

Watch the following video, or continue reading below, to find out;

Mortgage Rates

In its continuing effort to fight inflation, the Fed raised interest rates last week but mortgage rates actually feel.

How is that possible?

It seems counter-intuitive doesn’t it?

Truth is, the Fed doesn’t directly control mortgage rates but can influence them.

When the Fed raises interest rates personal loans, car loans, credit cards, and your savings account are all impacted.

30-year mortgage rates are actually tied to the yield on the 10-year Treasury Bill.

When there is economic uncertainty, like there is now, bonds are seen as a safer investment than stocks. As more money is invested in bonds the yield goes down, which causes mortgage rates to fall. That is what we are seeing currently.

Are We in a Recession?

That seems to be the million-dollar question and the answer depends upon who you ask. It’s become a bit of a political football.

Traditionally, here is how a recession is defined;

Typically, going all the way back to 1947, whenever there have been two consecutive quarters of negative GDP we are considered to be in a recession.

The current administration doesn’t believe we meet the requirement of “a significant decline in economic activity…” therefore, are not currently in a recession. We will have to wait and see if the National Bureau of Economic Research actually declares that we are in a recession.

Regardless of who you believe, talk of a recession is everywhere. Many investors, Fortune 500 CEOs, and the general public are nervous about the future of the economy and believe if we aren’t in a recession currently we will be soon.

A Recession and the Housing Market

Typically, the housing market performs well during a recession and is quite often the industry that helps the economy recover from a recession.

Here is how home prices have been impacted by the last six recessions;

As you can see, housing has done quite well in all recessions except the great recession of 2008, which was caused by a collapse of the mortgage industry.

That isn’t going to happen this time as lending standards are substantially different today and the fundamentals of the housing market continue to remain strong.

Likewise, as explained above, mortgage rates generally fall during recessionary periods;

While it is widely believed that mortgage rates will fall, you shouldn’t bank on seeing mortgage rates in the high 2%, low 3% range anytime soon, if ever, again. The general consensus is that we will see mortgage rates settle and remain in the low to mid 4% range by the second half of 2023.

Is Now a Good Time to Buy or Sell a Home

The number one question we are asked and one that is virtually impossible to answer.

Why?

Because the answer is different for everyone.

Truth is, the vast majority of homes are bought and sold based on life events, not what the economy is doing.

Tired of renting, getting married, getting divorced, starting a family, a growing family, becoming an empty nester, move closer to family, job relocation, etc.

For Buyers- many buyers became burned out and tired of the bidding wars and fierce competition. The good news now is everything has settled down, including prices. There are more homes to choose from, decisions don’t need to be made within the hour, there are virtually no bidding wars, and incentives are available from both resale and new construction sellers.

CLICK HERE to Search all Homes Currently For Sale in Frisco

For Sellers- although the market has settled down, homes are still selling relatively quickly, especially those that are priced correctly. Although you shouldn’t expect a bidding war to drive your price way up like a few months ago, it is substantially easier to buy a replacement home contingent on the sale of your existing home and there are plenty of new construction options available as well.

CLICK HERE for a Free Equity Analysis of Your Current Home

The best way to stay updated on current market conditions is with our Weekly Market Report. From this report, you can search any city/zip code in the area to see the latest pricing, inventory, and days on market trends.

Have additional questions or want to discuss your plans to buy or sell a home? Give us a call at 469-296-5230 or email Contact@S2RealEstateTeam.com