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US Real Estate & Home Insurance Update

Peaking Home Prices, Rising Interest Rates are the trend

As you have undoubtedly heard by now, home prices are starting to trickle down a bit as interest rates continue to go up. If you do more research, you probably won't take very long to come across numerous videos predicting a housing collapse. I do not feel the same way. In this article, I will explain my views using Economic Factors as the basis for this theory. I do see housing at the beginning of a slowdown. With any economy as it grows interest rates eventually grow with it. Rising interest rates may slow an economy but crash the economy itself? There's more to it than that. 

According to the numbers, even after loan forgiveness programs have ended it's reported that households that are behind on their mortgage are at their lowest levels since the pandemic. This is great news. When a housing market collapses, it's not just the sales that stop. People start to lose their own homes, and eventually, streets fill with "For Sale" signs and people share stories about walking away from their homes. We are simply not at that point yet. While Mortgage delinquencies are on the rise, they're not at crisis levels.  Going back to home prices, keep in mind that since 2021 home prices have skyrocketed. This type of growth is not going to last forever and a slow down is inevitable. Again, this does not show that we have an impending housing crisis.

Another figure that has come out recently is the labor force participation rate.  While the numbers aren't growing at high levels it still shows enough people are employed and gaining employment. This is basically the backbone because when people have jobs, bills are paid. Without jobs, bills are not paid. Wage growth while lagging inflation is still going up. Keep in mind, I am not saying this economy is perfect or is going in a great direction. I'm merely reporting what's happening as we speak. Right now I simply don't see enough evidence to suggest a housing crisis. I think with rising rates and home prices where they are now we will see more of a long drawn-out decline over the next 2-3 years. 

I believe this is going to be the start of where banks start writing a lot more questionable mortgages due to a lack of buyers. Some market experts predict homeowners will cash out on their equity but many are wondering where they would go? Unless you're willing to be in a rural or once crime-infested location the pickings are pretty slim at the moment. What could end up happening is financial institutions end up buying homes in droves from buyers looking to get out of their mortgages. That's a nightmare scenario you or I would not want to happen.