The Housing Bubble Is Bursting
Looks like the pandemic housing bubble may be bursting. According to Redfin home prices are plunging.
Back early in the pandemic in 2020, all over the country, places like Montana, Idaho, Utah and the like saw tons of people fleeing the city, for the simple life in states like these due to working from home.
Then prices began to skyrocket. Then, there were bidding wars between perspective buyers, giving some homeowners a very unexpected windfall of cash, as the house sold for much more than it's actual worth. Realtor friends were telling stories of homes that were listed for literally hours before being sold. Not days, not weeks, not months, hours.
Did anyone really think that was sustainable
I didn't. I kept thinking that selling a house that books at $150,000 for $300,000 wasn't going to last. Seriously, how can it? Eventually the pandemic would be over. Eventually, the newcomers would spend a winter in Montana or a summer in Arizona and would find out just why populations are so low in these areas. It takes a certain kind of person to build their lives in a place that can hit a low of 50 below in the winter, or have summers with temperatures at 110+ degrees.
Then, what happens to your investment when you want to sell? Well, you just lost around $150,000. In an economy where homes are now on the market that were purchased at one third to twice the average worth, is going to send the prices down. And fast.
Interest rates in March 2020 were about 2.68 percent. As of October 20, 2022, they're at 6.94 percent. That, alone, is enough to stop homebuyers in their tracks.
This adds an additional problem, buyers remorse. "I don't like living where the air hurts my face." Not only do you have to drastically reduce the price of the home that you overpaid, but is anyone going to be able to buy it with an interest rate rocking 7 percent?
The upside, is by this time next year, I'll bet home prices are much more reasonable, and I'll bet interest rates are down quite a bit, as well. Maybe some regular folks like us can actually become homeowners in our home towns.