The Housing Market Is Arguing With Itself

The housing market is officially arguing with itself.

Mortgage rates are hovering near 7%.

There are more homes for sale than we’ve seen in years.

Home sales have slowed.

So naturally, home prices are still going up.

Pick a lane, housing market.

On paper, this doesn’t make much sense.

Economics 101 says more supply + less demand + expensive money should put serious downward pressure on prices.

Housing apparently skipped that class.

So What’s Really Going On?

People looking to buy finally have choices again.

They can negotiate.

They can take their time.

They can walk away.

And an overpriced home is getting punished pretty quickly.

That is very different from the market we experienced a few years ago, when almost everything seemed to sell and buyers often had very little leverage.

But there is another side to the equation.

Most homeowners are not desperate to sell.

A huge number are sitting on mortgage rates far below today’s levels. If they do not have to move, many simply are not going anywhere.

That creates a very strange standoff.

People looking to buy want lower prices.

Homeowners want yesterday’s prices.

Mortgage rates are making everyone uncomfortable.

And nobody seems particularly interested in blinking first.

Then There’s the Mortgage Problem

Mortgage delinquencies are not flashing red.

But they are worth watching.

Overall delinquencies have improved slightly in recent months, while remaining higher than they were a year ago.

Serious delinquencies have also been creeping higher, and foreclosure activity has increased.

That does not mean we are heading toward another 2008.

Not even close.

But it does mean there are more households starting to feel financial pressure.

Call it a yellow light.

Not a crash.

Not a crisis.

Just something worth paying attention to.

The Big Question: What Happens to Mortgage Rates?

This is where the housing market could get really interesting.

If mortgage rates stay around 7%, affordability remains difficult.

Demand stays restrained.

Inventory continues building.

And homeowners who genuinely need to sell may have to become much more realistic about price.

That scenario gives people looking to buy even more leverage.

But there is another possibility.

If mortgage rates fall meaningfully, there is an enormous group of people sitting on the sidelines who could suddenly jump back into the market.

And if demand wakes up quickly, that additional inventory may not look nearly as impressive as it does today.

That is the part people tend to overlook.

Two Things Can Be True at the Same Time

This may be one of the better negotiating environments we have seen in years.

AND...

Waiting around for some giant housing crash could still turn out to be a very expensive bet.

Those ideas are not contradictory.

They are the market.

Right now, people looking to buy have more leverage, more choices and more time.

But well-priced homes in good locations still sell.

Sometimes quickly.

The market has become far less forgiving of bad pricing, but it has not stopped rewarding value.

I Don’t Think the Housing Market Is Broken

I think it is stuck.

And stuck markets usually create opportunities for the people willing to look past the headlines and actually do the math.

The mistake is trying to make a housing decision based on a national prediction.

Nobody on television knows exactly where mortgage rates will be six months from now.

Nobody knows whether home prices nationwide will rise 2%, fall 2% or barely move.

And frankly, that is not the most important question anyway.

Real estate is local.

Sometimes incredibly local.

The right question is not:

“What is the housing market going to do?”

The better questions are:

What is happening in the neighborhood?

What is happening with this particular property?

What does the monthly payment look like?

How much negotiating room exists?

And most importantly...

Why are you considering making a move in the first place?

I would not make a $500,000 decision based on what somebody on CNBC thinks mortgage rates might do next spring.

I would look at the numbers.

I would look at the options.

I would look at the local market.

Then I would make the decision that makes sense for me.

That is a much better conversation.

And here in Tampa Bay, that conversation can look very different from one neighborhood to the next.

If you are trying to figure out what this market actually means for you, that is exactly the conversation we should be having.