Is The Housing Market Is About To Crash? 4 Reasons You Should Wait To Buy
You've probably heard the rumors: Inflation is out of control, the economy is tanking and a housing market crash might be on the horizon. Are any of these true?
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Andy Heller, a professional real estate investment speaker at Regular Riches, LLC, noted that while no one can predict the timing and severity of crashes, 'a prospective homeowner and investors can turn to history for clues.' Specifically, Heller cited the recession that followed the Savings and Loan collapse in the late 1980s, another recession that came with the dot.com bubble burst in the late 1990s and finally, the Great Recession caused by the banking collapse of 2008.
Taking history into account and learning from it, there still might be a few reasons to consider waiting to buy a house until the the coast is clear and the housing market looks stable.
William London, a partner at Kimura London & White LLP, said if 'property values drop after your purchase, you can find yourself in a position where you owe more on your mortgage than the home is currently worth.'
This, London highlighted, can severely limit your ability to refinance, sell or use your home as a financial asset.
'Holding out during a market downturn can lead to achieving a better long-term investment,' added London.
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According to Londa, a high-pressure, inflated market, buyers may waive contingencies like inspections or appraisal clauses to stay competitive.
However, as London pointed out, 'That leaves you legally vulnerable if hidden defects or appraisal gaps surface. If a downturn is likely, it's wise to wait and buy with full protections in place.'
'If interest rates stabilize or decline along with home prices, potential buyers can expect an increase in negotiating strength and financing options,' explained London.
London detailed that in the current scenario of high rates and high prices leads to slim margins, so delaying the purchase may aid in cutting the acquisition price and better loan terms.
In a correction, London highlighted that distressed properties and increased inventory often enter the market, offering buyers more choices and stronger leverage.
'You may avoid overpaying for a home that may soon face stiff competition from better-priced alternatives,' London described. 'Though timing the markets is inherently faulty, clever buyers consider not only economic signals but likewise the contractual and legal risks of picking assets at their high point.'
Based on historical trends, Heller outlined that not only did real estate values fall during past recessionary times, government efforts to stimulate economic recoveries typically include lowering interest rates to aid with economic recovery effort, including the housing market.
'Therefore, assuming the prospective homeowner maintains employment and creditworthiness, timing purchases to follow resets should not only result in lower property prices, yet lower interest rates which will provide the purchaser with lower payments for the life of the loan,' Heller summed up.
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This article originally appeared on GOBankingRates.com: Is The Housing Market Is About To Crash? 4 Reasons You Should Wait To Buy
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