Rising interest rates in 2022 put pressure on home prices, raising the hopes of prospective homebuyers that they will see some price declines. The sale of existing homes dropped by 35.4% in November 2022 on a year-over-year basis, and figures from the U.S. Census show that new home sales are down since the highs seen in 2020. However, the overall housing supply in the U.S. remains limited, causing many people to worry that prices won’t fall.
Several mixed views are currently being discussed concerning the real estate market, meaning that many investors are worried that we will see a market crash, especially sellers who bought high.
According to Dakota Worrell, President of the Wyoming-based DW Investors, LLC, several problems contribute to the housing shortage. “The first is that people who bought real estate on lower mortgage rates are not eager to place their homes for sale on the market. The second is that new home construction is now slowing down dramatically.”
He adds, “It’s this tight inventory that continues to keep prices elevated, even though we have seen a slight dip, making homes unaffordable for buyers, especially those looking for their first homes. The mortgage rates will determine if we will see further price drops in 2023.”
Currently, discussions concerning the real estate market include many different opinions, with many investors worried that we would see a market crash. These include people who bought at high prices. Here is a rundown of how Dakota Worrell currently feels things will develop.
Year-on-Year Price Increases Slowing Down
Dakota Worrell also serves as President of SLERIA, the largest real estate investment association in the Mountain West area. At age 27, he owned over 200 housing units. He also developed the first tiny homes on infill development in Pocatello, Idaho, remodeling and rebranding properties within areas with problems.
With his various developments, his company aims to instill a sense of community and pride in owners across several regions by restoring dilapidated buildings.
Worrell’s experience in the real estate market is current, meaning he has some excellent perspectives to share.
Existing home sale prices increased by 2.3% to $366,900 in December from last year, meaning it is the 130th consecutive month of year-on-year price increases. However, the cost of existing-home sales prices has moved downward to about 11% lower than the record high in June of $413,800.
“After 11 consecutive months of sales declines and the stabilizing mortgage rates, the Mortgage Bankers Association announced an increase of 7% in mortgage applications in mid-January,” says Worrell. He is almost certain the market has reached its lowest point, but it’s all going to depend on the Federal Reserve.
Housing Inventory May Take Longer to Recover
The recession of 2008 is mainly responsible for the backlog in housing inventory, which has created the demand and consequent higher real estate prices. But, unfortunately, homeowners who bought at lower interest rates will continue to hold their homes, meaning that we could see inventory remain low for this year, according to Worrell.
“Builder confidence is still low, even with supply costs coming back down to reasonable levels. It will take time for that confidence to return to normal levels,” Dakota Worrell believes.
Worrell says there is one solution to this problem – to fix neglected and abandoned properties to meet the housing requirements of first-time home buyers makes perfect financial sense. In addition, introducing new units adds value to the rest of the area, and the added supply also decreases rentals. All in all, these developments provide the supply required and make lives better.
In the areas served by DW Investors, homeowners don’t need to list their houses or pay a commission. Instead, when they decide to sell to the company, they get a unique offer to the seller’s market with a fair cash offer that considers the required repairs. In no time, the property is available for resale to available buyers.
So, will the real estate market crash? “No,” is Worrell’s adamant response. “Considering our inventory issues, we have an oversupply of buyers but few houses. Therefore, we will see some price corrections but no crash.”
“We may see price drops on average nationally, but these won’t continue to be as dramatic,” according to Worrell. “We will also see sales and price growth in some areas that have remained quite affordable until now, meaning more equity for homeowners.”
As things stand, buyers cannot afford to hold back waiting for prices to fall, since predictions for corrections may not occur in all areas. Therefore, they must carefully consider their financial position when deciding and buy a home within their budget to meet their needs.