Slow Journey Towards A "Normal" Market

The New York Times recently published an article: "Buying or Selling a Home? Welcome to the Year of Disappointment" where they describe the current market challenges where prices are down from their peaks of 2021/2022 however buyer affordability is also much more challenged as interest rates therefore monthly payments are significantly higher as well. Compounding this is seller reluctance to leave their low interest mortgages behind while they seek a home that better meets their needs or wants for the future. This is constraining supply so much that prices are rising again and many homes are seeing significant competition which is definitely very disappointing for the buyers who have been waiting for major price declines for years.

After a decade of historically low mortgage interest rates fueled first by the recovery from the great recession and then held low by political pressure and desire for economic growth, we are returning to reality of normalized interest rates closer to the 50 year average of 7%. A majority of economists think that our long-term mortgage rates over the next decade will be closer to 5.5%, though cycling in a range of 5.0% to 7.0% depending on the specific market conditions of the moment. We've yet to read anyone expecting mortgage rates to return to the 3.0% to 4.0% range unless we see another recession like the great recession and need to significantly stimulate economic growth.

With this in mind, it seems our national and real estate economy is on the slow inevitable journey towards a normalized market with more long term average interest rates. Unfortunately,  there will be disappointment in this journey as we need to make compromises between the things we need, want and dream of – and what they cost. 

While it seems impossible right now, it's important to know many homeowners built significant wealth and security in the 1970s to 1990s when interest rates were at today's levels or even higher. The key is making great strategic, long-term choices based on looking at the bigger picture to find the right balance of your financial picture and life goals.

In the end, these market conditions are not going away, and the sooner everyone can acclimate these realities the sooner they'll be able to move forward toward the home they truly love and dream about.