The housing market has taken a few hits, such as a doubling of mortgage rates in 2022, but it remains solid even if legitimate news providers suggest otherwise. The rock-hard foundation of the U.S. housing market is suffering some cracks, but as yet, there's no "bubble" to burst. Never the less, potential buyers are bombarded with sensationalist news headlines all over the country. Here are recent examples from legitimate websites:
In spite of reports like these, builders are still building, buyers to are still buying, and you know that mortgage brokers are lending to qualified borrowers. Builders and mortgage lenders can't make money if they're not doing business, and buyers still need places to live.
For all these reasons, the real estate market has been and will remain resilient, through the ups and downs of the U.S. economy and pandemics. On a national level, home prices soared 40% over the past two years, according to the Case-Shiller Price Index.
These price increases have been even bigger in Southwest Florida, and in western Collier County locations such as Marco Island and downtown Naples, increases in some cases have topped 100%. Of course, with the recent inflationary policies of the party currently in control of the federal government, the Federal Reserve has begun a campaign of interest rate hikes - four so far this year, raising the prime rate from just about 0% to 2.5% currently. Hikes in the prime rate have inevitably been reflected in the rates for mortgage loans, which are currently running above 5%.
With the Fed’s recent moves, mortgage rates have doubled in the last two years, but still they're not historically high. Throughout the 1980s and again in the early 2000s, for example, rates ran close to 10%. As a result, mortgage applications have declined somewhat – to the lowest level since the early 2000s. However, cash buyers still dominate much of the Southwest Florida market, and cash buyers care a lot less about high mortgage interest rates than buyers relying on a mortgage.
As a result, home builders are still building away here. Of course, a decline in mortgage applications will inevitably reduce demand somewhat, which will mean that home prices won't continue to increase at the previous rate, especially in the new build market. We've seen this reflected in numerous instances of reductions in listing prices. However, a reduction in the listing price is not the same as a reduction in price. It's merely a reflection of the fact that the SWFL market has stabilized at a new price level.
So is there a "collapse" in the housing market? Not here, not yet anyway. Buyers need to put all these housing price indices and mortgage statistics and the resulting headlines into context. Home prices are still near record levels in Collier County, and they're not going down any time soon.
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