Inflation and recession chatter have put the brakes on the once-runaway housing market. But there's no crash in sight, according to one expert.
“What we're going to do is just go back to normal,” Debbie Boyd, CEO at DLB Financial Services, told Yahoo Finance Live (video above). “Before COVID, you would put your house on the market and it may stay there two or three months and you'd get a couple offers. We're back to normal and normal means things are going to go a little bit slower.”
Higher mortgage rates are largely to blame for driving buyers away with 14.9% backing out of home sale contracts in June. New home construction sales slipped again in June due to depressed demand with an 8% drop in single-family homes compared with May and a 17.4% decline year over year.
“Demand has changed now and builders that could not build fast enough in February have an onslaught of inventory now and they're doing specials trying to get you to come back and buy,” Boyd said. “People are tired. They've been looking for houses for a long time and are not going to buy out of the lease when prices and the economy is doing what it's doing now.”
This year started as what some experts called the worst housing affordability crisis, with many first-time buyers pushed out of the market earlier this year.
At the beginning of the year, mortgage rates were around 3.55% and the Mortgage Bankers Association (MBA) forecasted rates would reach 4% by December 2022. This week, the 30-year fixed mortgage stood at 5.30%. This week, the Federal Reserve also raised interest rates 0.75% to stave off inflation.
“We said last year that the rates were going to double — buy now,” Boyd said. “And people said, no, inflation isn't going to be what you say because rates aren't going to go up that high. There's just no possible way — they ignored the signs.”
Budget worries are also factoring into the decision on whether to enter or remain in the housing market.
“People are tighter with money and it really comes down to your family's finances. What's happening for you and your family, not the economy,” Boyd said. “Some families are doing really well. They've got two employed people with secure jobs. Other families are still struggling. It all comes down to your personal finances.”
Ronda is a personal finance senior reporter for Yahoo Money and attorney with experience in law, insurance, education, and government. Follow her on Twitter @writesronda