3 WAYS A SLOW HOUSING MARKET MAY BE BENEFICIAL
Last year, the housing market showed no sign of slowing in favor of the sellers. Homes went under contract in a matter of days and well over asking price. Many buyers were competing with 10-20 other buyers to get noticed. Now, it seems, the housing market has run our of energy. We now face inflation, recession and higher mortgage rates. Rates are now hovering over 7%. Some homebuyers are no longer able to qualify for a loan and buy a home. With less buyers, it now takes longer for homes to go under contract and there are more negotiations involved. The question is if real estate in a deep sleep? And is this a bad thing? Here are 3 ways this slow housing market may be beneficial.
1. Cooling Market Makes Home Buying Easier
As the real estate market takes a little nap, it means home buyers have a better chance of getting the home best suited for their needs. With less competition than last year, qualified buyers stand a much better chance. During this time, buyers won’t have to compete against multiple offers. This increases their chance of successfully going under contract. This also gives buyers more time to view homes and decide on just the right one. Negotiations become more balanced as buyers are able to request home inspections and keep appraisal contingencies intact. In some cases, sellers are also offering concessions towards closing costs.
2. Real Estate Continues to Hedge Against Inflation and a Volatile Stock Market
According to the National Association of Realtors, ” A growing number of young adults are charting a different path toward building wealth through homeownership, prioritizing buying an investment property before a primary residence.” They also stated, “Twenty-eight percent of survey respondents say they’re considering purchasing an investment property now, despite the current economic climate. “As the Federal Reserve increases interest rates in an effort to tamp down inflation, that can impact demand for rental homes, too,” Brien says. “If it becomes more expensive for potential buyers to finance a purchase, fewer will be able to afford it. This will increase demand for single-family homes and create more upward pressure on rental prices.” This allows them to do what many investors buying homes now are doing – utilizing their cash for properties whose value will increase over time. On average, home values are expected to increase about 4% in 2022 in Northern Virginia. This is according to Virginia Realtors. Buying property during a time of inflation has many advantages, according to Forbes Magazine. This includes tax benefits, taking advantage of increased rental income, and appreciation of home values over time.
3. Normalizing of the Housing Market
As the buying frenzy begins to slow, the real estate market is normalizing. This is good news for those wanting the American dream of land and home ownership. For sellers, it’s a time for patience and renewed expectations. Home prices are still going up year after year but the dramatic 15-20% is a thing of the past. Homeowners can now expect a strong and healthy 3-5% appreciation of their home. This seems to be very fair.
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Real estate in Northern Virginia remains strong despite a slowing of the market on a national level. The area maintains demographics of low unemployment, higher wages, and a growing economy.
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