It Started: Housing Prices Are Collapsing

Let’s talk about the housing market, why and where prices are dropping, and what this means for the rest of 2022 – Enjoy! Add me on Instagram: GPStephan | GET MORE DETAILS ON MY NEWSLETTER: http://grahamstephan.com/newsletter

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THE 2023 HOUSING MARKET:
According to BlackKnight research, national housing values have currently lost an average of 7.6% throughout Q3 of this year, which, is the largest decline since 2009 – and, as a result, many recent homebuyers are now UNDERWATER on their mortgages – meaning, they currently owe MORE on their loan, than what the home is worth.

To make matters worse, even though this reflects an average of 8% of all outstanding mortgages issued in 2022, other locations are seeing much worse numbers, some as high as 20-30%…and, as housing prices continue to decline, more and more borrowers are pushed to the limits in terms of having almost NOTHING left to fall back on.

For instance, “40% of homes bought this year have less than 10% equity left to tap” – and, as we enter some of the seasonally SLOWEST months of the year, those MOST impacted, and most likely to default are the ones who put little-to-no-money down.
https://money.yahoo.com/homebuyers-underwater-mortgage-203707947.html

As BlackKnight points out, Early Payment Defaults, which, calculates how many people are behind on their mortgage in the first 6 months, have risen to levels that we haven’t seen since the Great Financial Crisis of 2009.

https://www.blackknightinc.com/wp-content/uploads/2022/12/BKI_MM_Oct2022_Chart06.pdf

Now, on a positive note, when you account for ALL outstanding mortgages, delinquency rates are still the LOWEST they’ve been in history…but, as they mention, the majority of defaults are almost ENTIRELY isolated to those with less than a 680 credit score.

In fact, the situation is so severe that nearly TWO-THIRDS of FHA borrowers have less than 10% equity left, and, in some locations – like, Colorado Springs, Honolulu, Virginia Beach, and Riverside, California, more than 20% of homes have limited, or negative equity – which, puts them in a precarious spot, should the market continue falling.

So, as someone who’s worked full time in real estate since 2008, personally – I wouldn’t be surprised if prices fall between 5-10% over the next 2 years…I wouldn’t be surprised if some “euphoric markets” fell as much as 20%-25%, only because they’ve already gone up SO MUCH already…but, I don’t think this points to a cataclysmic crash to a large degree, and – it’s probably going to be WAY more mild.

I think this might lead to some REALLY good buying opportunities throughout the next year and, I’m personally keeping cash on the sidelines to buy commercial office or warehouse space, whenever I find a good deal.

If you’re a buyer, be patient – and, shop around your mortgage rate…the market is turning in your favor, so – use that to your advantage. And, for sellers – if you’re SERIOUS about letting go of your property, you have to price it aggressively – from DAY 1 – if you want to sell – otherwise, you’re wasting your time.

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