How do you believe your personal financial situation will change in 2023?
- It will worsen. (47%, 21 Votes)
- It will improve. (33%, 15 Votes)
- It will remain the same. (20%, 9 Votes)
Total Voters: 45
What happens when your ship takes on water faster than you can bail it out?
It sinks. Kind of like today’s homebuyers stuck with their newly minted purchases.
A median-income household who purchases a median-priced home today will be considered housing burdened — spending more than 30% of their income on principal and mortgage interest alone — according to Zillow.
Of course, median figures are generally useless to a practicing real estate agent or broker, since incomes, prices and other housing market variables fluctuate immensely from one neighborhood to the next. But considering the typical share of household income spent on principal and interest averaged from 2005 to 2021 was just under 23%, today’s leap is a tsunami for what is sometimes termed affordability.
Many would-be homebuyers are throwing in the towel altogether, choosing to rent instead.
Nationally, the median monthly payment on mortgage purchase applications surged to just over $2,000 for conventional mortgages in September 2022 — the highest median mortgage payment ever. This is up from $1,400 just a year earlier and $1,200 in 2020, according to the Mortgage Bankers Association (MBA).
With new mortgage payments jumping a massive 40% since the start of 2022 — and rising — it appears homebuyers are giving more than sellers in 2022’s ongoing tug-of-war over rising mortgage interest rates.
However, ask anyone in the field today and they will tell you sellers are increasingly cutting prices and offering seller concessions, even paying mortgage points to decrease the homebuyer’s mortgage payment.
In other words, sellers are bending in the wind, but they will need to bend over backwards in the months to come if they are going to continue to attract buyers in today’s recessionary housing market.
But it gets worse: with the price cuts piling on, home prices are plummeting from their May 2022 peak, sending recent homebuyers into negative equity status immediately upon signing the dotted line.
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Economic recession or not, the housing market recession is here
Rough seas ahead for real estate agents
High mortgage rates and still-high (but falling) home prices make 2022 the absolute worst time to be a homebuyer. However, now is better than tomorrow in terms of being a seller, as prices will only continue to decline in 2023-2024, expected to bottom here in California around 2025.
This desperation puts sellers in a weak position, pushing the housing market into the first buyers’ market in a decade.
For readers new to real estate in the last decade, 2022 is the first buyers’ market (and real estate recession) you’ve needed to weather. So, what’s your best strategy to continue making a living in this new era for real estate professionals?
Brokers and agents need to plan their survival strategy as soon as possible, because the old ways of catering to sellers and grasping for listings simply won’t cut it.
To regain income lost, agents can expand marketing efforts to focus on buyers and renters.
As prices continue to fall, the listings which remain will increasingly be heading toward distressed sales. Agents who continue to take on listings during the recession will need to become familiar with these nontraditional listings, like real estate owned (REO) property, foreclosures and short sales.
Agents can also get ahead by catering to investors, who are some of the most active buyers in a recession. Become versed in forming real estate syndicates and acting as property manager for investment properties acquired by syndicates.
Agents can also pivot into adjacent forms of practice, such as:
- obtaining a broker’s license;
- becoming a property manager;
- obtaining a mortgage loan originator (MLO) endorsement; and
- becoming a notary public.
Real estate agents: How often do your buyer clients bring up the state of the housing market in 2022? Are they worried about buying even as prices are declining, or do they feel pressured to buy now? Share your experience with other readers in the comments below!
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