Why You Might Not Want to Get too Excited (or Nervous) About a Housing Crash

Rising interest rates and slightly lower demand in the market has caused many people to believe that a housing crash is imminent. Despite some signs that the market is slowing down, you shouldn’t get too worried or excited about the possibility of a housing crash.

Recent Economic and Market Changes
Inflation in the U.S. has been on the rise since mid 2021 and reached a 40-year high of 8.2% in September. To combat the increase in inflation, the Federal Reserve has increased interest rates multiple times throughout 2022, making it more expensive to borrow money. These rapid rate changes directly impact the housing market – mortgage rates have doubled this year, which has caused some buyers to pause their home search, and sellers to receive fewer offers on average.

Another factor at play is the Russian-Ukraine war. A ban on Russian oil has driven up energy prices, which in-turn has led to more inflation.

These rapid changes in consumer prices and home prices have been jarring for many consumers and have stirred concerns of a recession and/or housing crash. The good news is that the U.S. job market remains strong, and consumer spending is steady despite the effects of inflation.

Signs Point to a Strong Market
Despite the warning signs that the housing market might be slowing down, there isn’t any indication that there’s going to be a significant downturn in the market that will allow you to buy a home at a much cheaper price.

For one, buyer demand is still high. Many Millennials are expected to buy homes for the first time in the coming years. In 2021, first-time homebuyers made up the largest share of homebuyers at 34%. Since there are a high number of first-time buyers in the market, it’s likely that demand will continue to be strong for the foreseeable future.

Secondly, housing inventory remains near historical lows. A housing crash usually happens when there is excess inventory and hardly any buyers. Lending standards are also much stricter today than in 2008, reducing the number of loan defaults and foreclosures.

As long as home values and demand remain high, there isn’t much that can cause the housing market to crash. If you want to buy a home, property values might drop slightly throughout the remainder of 2022, however you shouldn’t expect a sizable drop anytime soon.

Southwest Florida Real Estate Market Update

In October, Single Family Home Active listings in Lee County were up 89.1% compared to October of last year, and Condo & Townhouse listings were up 102.4%. That relates to a 2.6-month supply of inventory for Single Family Homes and a 1.7-month supply of inventory for Condos & Townhouses. Some good news for Buyers that are still in the market, as they have more homes to choose from. Although still a Seller’s market, they do have more competition. Year-over-year Sales Prices are still up. October’s Median Sales Price for Single Family Homes in Lee County was up 15.5% and the Median Sales Price for Condos & Townhouses was up 20.0% compared to October 2021. Prices continue to be up over last year, but they have been down compared to the previous month for 4 of the past 6 months. October did surpass September’s Median Sales Price by $15,000. (see 2nd data table below showing the Median Sales Prices for Single Family Homes in Lee County by month from 2019 through October 2022 for reference).

During the 3rd week of each month, the Florida Association of Realtors® releases the official numbers from the prior month comparing year-over-year activity. Below are some of October’s numbers, for your reference. If you are interested in learning more about market activity in a specific neighborhood, development, city, or zip code, please let me know. I will be happy to provide you with a free customized market analysis.

                  Lee County Single Family Home Sales – October 2022

Closed Sales          725 (Oct 2022)           1,365 (Oct 2021)          -46.9%

Median Price      $425,000 (Oct 2022)    $368,000 (Oct 2021)      +15.5%

Average Price    $531,608 (Oct 2022)     $500,854 (Oct 2021)       +6.1%

Active Listings       3,347 (Oct 2022)           1,770 (Oct 2021)        +89.1%
(Source Florida Association of Realtors, Data released November 18, 2022)

Market Historical Data
Prices are up over last year, but they have been down compared to the previous month for 4 of the past 6 months. October did surpass September’s Median Sales Price by $15,000. Below is the historical sales data showing the Median Sales Prices for Single Family Homes in Lee County by month from January 2019 through October 2022, for your reference.

  Lee County – Single Family Home Sales – Median Sales Price

(Source Southwest Florida MLS – December 6, 2022, Results calculated from 60,972 listings)

Real estate market conditions are always changing. Invariably, Sellers and Buyers need to turn to a local experienced Realtor® for their expertise, knowledge, and support. I have a proven track record and pride myself in helping people make knowledgeable real estate decisions, as well as making the process as easy as possible. If you are interested in buying or selling a home in Southwest Florida or know someone who might be, please call me at 239-699-3498 or email me at sue.jones@c21.com.

QUESTIONS? I am always available to answer your questions and help you with all of your Real Estate needs. I have Real Estate contacts all over the world. Please don’t hesitate to call me if there is anything I can do for you or someone you know.

Sue Jones | Realtor®
Direct: 239.699.3498
3409 Del Prado Blvd S #103,
Cape Coral, FL 33904