Panic Is Setting In – The Housing Market Must Be About to Crash
Over the last few days, I have been flooded with articles about one mortgage company after another laying off hundreds, or thousands of employees because over the last several weeks, mortgage originations are down. Similarly, I am seeing articles that title companies who close residential loans, are laying off employees for the same reason. Armageddon has arrived! The market has finally crashed. We are all doomed!
Frankly, I am stunned. Despite recent increases in interest rates and despite record-breaking inflation, I am not seeing any signs of a housing slowdown. Prices are not falling and in fact, may still be increasing. Residential brokers still complain that inventory is low and demand remains high. So, why the panic? The slowdown comes from the refinance market. As rates have climbed, people have stopped refinancing their homes. The mortgage boom of the last decade may come to an end as residential mortgages approach or even exceed 5%. Most of us have locked in rates in the 3% range or lower so it clearly does not pay to refinance. But this is not dissuading new home buyers, still flush with cash in the form of equity in the sale of their existing homes. As they obtain mortgages in the 5% range today, they will refinance when the rates come back down in the coming years.
Perhaps it is the mortgage and title companies that are being short-sighted? What goes up, must come down. Or, the mortgage corollary – what is financed high, must be refinanced low.
The good news, for those of us in real estate, the housing market is not crashing. Don’t look for a crash any time soon, either.