The unseasonal market slowdown this summer gave me an eerie feeling similar to what I felt before the last recession, but it's a much different scenario than it was back then. Many buyers are speculating that prices will drop and that a correction is on the way. Some media sources predict a mild recession, saying that based on prior history, we're due for one shortly.
The most frequent concern is the rise in interest rates, but even after the Federal Reserve raised the funds rate Dec. 19, mortgage rates have remained quite stable. At time of this writing, the rates, according to "Mortgage News Daily," were:
30 year fixed 4.625-4.75%
15 year fixed 4.125-4.25%
Inventory typically declines during fall and winter and picks up again in the spring. Even though interest rates may be higher, the increased inventory that typically starts in the spring will balance out the supply side, exerting pressure in the opposite direction.
There were many price reductions this last summer—and much of that was because homes listed in spring and beginning of summer were priced with the expectation that market prices would continue to rise at higher levels. It has been suggested that rather than being indicative of an economic downturn, the lowered prices were simply price corrections by sellers, as sellers typically price homes higher to provide room for negotiation and to keep up with the market growth rates preceding the listing.
Our current housing market, while having affordability issues, is basically strong with continued demand expected in the coming new year. The banking regulations put in place during the Great Recession will prevent the housing market from taking down the economy as it did the last round.