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What Does a Housing Recession Mean for Investors?

Protecting Yourself and Your Investment

As mortgage rates rise, the once highly competitive housing market is starting to cool. The combination of sky-high home prices, rising mortgage costs and soaring inflation have forced all but the wealthiest (and determined) out of the current home market. This trend is causing some investors to question their choices based on recent economic data. 

How Did We Get Here?

During the pandemic, housing prices rose to a historic level due to low mortgage rates, an ever-tight supply of homes, and other contributing factors such as the option to work remotely. However, the home market bubble is beginning to change or, as some may say, “burst.” 

In the Raleigh Market, we have seen a decrease in the price of homes for sale due to the mismatched housing market and increasing interest rates. We have also seen a slight dip in the value of rentals. There are three primary reasons for this:   

  1. Historical highs in rental rates were inflated due to an extreme lack of inventory, but inflationary increases can be temporary.
  2. The cooling sales market has resulted in more people choosing to rent their houses. This increase in inventory has led to more competition, which drives down prices.
  3. Seasonal cooling refers to the market being crazy and peaking during the summer months, then cooling off in the fall and winter months.  

This information leads to the question, are we seeing a return to normal?

Interesting Data to Watch

Consumers are starting to notice the change in the housing market, which has prompted numerous searches on Google about the idea of a “housing crash.” In fact, according to Google Trends data, more people are searching for terms related to the bursting housing market than at any other time since 2007. 

However, the foundations of this housing market (compared to 2005-2007) are far more stable and less worrisome. The supply of homes for sale remains low, and borrowers are far more creditworthy. Housing economists have also been predicting that the housing market would cool for months. In fact, many feel that this decline is a slowing down of the market instead of a complete collapse or burst.  

A Wise Choice: Be Conservative

With this information, it is no surprise that investors are wary of thinking the price trend will go up anytime soon. Based on the date, the valuation of property needs to be conservative to avoid bad investments. A conservative real-estate investment strategy focuses on preserving capital while generating income through low-risk investments. 

Investors should also remember that while investing is based on economics, real estate is one of the most stable investments because housing is a basic and fundamental need. People need to live and seek shelter no matter what is happening in the world on a financial level. 

Need Help Managing Your Investment Property?

At Oak City Properties, we’ve streamlined the experience of purchasing and owning investment properties through a trusted and reliable mindset built on decades of measured success. Our team of real estate and investment professionals is ready to help you manage your most significant assets through a hands-on approach that focuses on consistently generating results. Want to learn more about our commitment to effective real estate investing and property management? Give us a call at (919)-232-9222 or check out our website: www.oakcityproperties.com

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