PURCHASING REAL ESTATE IN A NORMALIZING MARKET, IS NOW A GOOD TIME TO INVEST?

By Teala Smith

There are many speculations encompassing the real estate market and a foreboding housing bubble. It is true the housing market is shifting towards normalization, but a shift does not equal a housing market crash.

Potential homebuyers fear the housing market regardless of the state of the market. When rates are low, people doubt the appreciation value of the real estate and worry the housing market will crash. When rates are high, people have the same doubts and continue to worry the housing market will crash.

The Great Recession of 2008 left the general population living in a state of fear and anxiety regarding the housing market. The economic havoc experienced during this time was disastrous, but the downfall of the recession came with red flags that lending enterprises chose to ignore. The housing burst was fueled by cheap credit and risky lending standards. Lending guidelines have changed since then, and strict lending standards have been enforced to prevent future housing market crashes.

The real estate market during 2020 was a complete anomaly in terms of market appreciation, inventory shortage, and mortgage interest rates. Even though real estate prices have seen a slight reduction in the most recent six-month period, it is important to note this shift in real estate is a market normalization and is not likely to lead to a housing market crash.

There are no perfect conditions to buy real estate, and it is not possible to “time the housing market.” Educating oneself in the real estate industry is the best way to decern whether an individual is ready to take the dive into homeownership. Renting can be an easier solution for short-term scenarios, but one begins building the foundation of generational wealth by purchasing real estate.

Investing in real estate can essentially be thought of like opening a savings account. Every month a portion of the payment goes into a savings account, where it accrues in the form of equity. Through the duration of homeownership, the home is increasing in value in the form of appreciation. When the homeowner decides to sell the property or withdrawal equity, all the principal paid will have doubled or even tripled, leaving the homeowner with equity in the form of liquid assets.

When it comes to purchasing real estate in an inflated market, the common opinion of nonreal estate professionals is purchasing during inflation is not an ideal time to purchase. On the contrary, some positive aspects of purchasing in a normalizing market are less competition from other potential homebuyers, lower sales prices, and more buyer negotiating power. Home prices are lower; therefore, homebuyers purchasing during inflation take advantage of discounted real estate prices.

Interest rates may be slightly higher now than in the most two-year period, but a smart buyer will take advantage of today’s market conditions, purchasing the ideal home and refinancing in the future.

Since the hike of interest rates earlier in 2022, lenders have started rolling out new loan products to help combat the current circumstances and help homeowners ease into the real estate. Of these new products, a 3-2-1 Buydown and guaranteed rate pledges are popular tools in today’s market.

Overall, when future homebuyers understand the value of real estate, this knowledge becomes priceless and builds financial freedom to be passed down for generations to come. A normalizing housing market comes with positive factors like lower sales prices, less buyer-on-buyer competition, and buyer negotiation power. When it comes to purchasing real estate, it’s important to remember the housing market has natural fluctuations, but overall real estate is a triedand-true method of investing with ROI far surpassing any other type of investment portfolio. Some may live in fear of a housing recession, but given the facts we have today, and the shortage of inventory, a housing market crash is unlikely. Real estate still ranks as one of the top investments an individual can make.