Covid Paused The Correction

 August 2, 2022

Charlotte Stories - Read full article here.

In a fast-changing real estate market, it can feel overwhelming and confusing to the consumer.

“Is now the right time to buy?”

“Will interest rates continue to climb?”

“Should I buy and wait? Or wait to buy?”

Confusion has caused an imbalance of information to spread throughout the media. One day, the message is encouraging homeowners to sell before prices fall, while the next, there is a warning that the market is scarce, and there are no homes to move into once you sell.

“Everything is moving to Charlotte, but, who is moving to where they are selling?”

What is the correct information?

How can you make informed economic decisions for yourself and your family?

I recently sat down with David Hoffman, CEO/Founder of David Hoffman Realty, Covenant First Mortgage, and Beyond Title. Prior to entering the real estate industry, David was an economist in the early 2000’s, so, over the years, David has proven to be a trusted source of information and guidance on the real estate and economic climate.

“Buying a home is the most emotional decision that you can make; it also needs to be the most logical and informed. That is why so many macro economic and micro housing variables need to be addressed. ” He states in a recent interview.

“Understanding the current economic climate will help the client to better understand where and why the housing market is where it is, and where it is going. What is happening in the world is bigger than what is happening in your own backyard, but what is happening in the world today will be in your backyard tomorrow.,” David continued.

David’s economic background and knowledge of the real state market allow him to make predictions based on logic and patterns in historical outcomes.

“To understand where we are going, we must first understand where we have been, as the economy is a cycle.”- Hoffman said.

Where we were

In 2019, before the Global Pandemic hit our world, David reminded me that the housing market was at an all-time high. At the same time, interest rates were at all-time lows, and inflation was not yet considered after years of slow growth, stagflation, and even, deflation

The stock market in 2019 was up, according to CNBC; “The S&P 500 was up 28.9% for 2019, its biggest one-year gain since 2013, when it rallied 29.6%. The Nasdaq also had its best one-year performance in six years after rallying 35.2% in 2019. The Dow also rose 22.3% in 2019.

“What goes up must come down, a correction was coming nearly three years ago.”Hoffman said.

Predictions were made; interest rates were going to rise, and the stock market was scheduled to come down. Interest rates should have risen from 2016 on, rather than tripling in 2022, leading to sticker shock.”

Before that correction could happen, the world shut down, due to Covid 19, along with the trajectory of the economic climate.The correction was on pause.

The Great Pause

While the predicted economic changes were on pause, our view of homeownership was shifting.With families locked down to their homes; adaptation began to happen. We set up schools in our living rooms, offices in our kitchens, and playgrounds in our backyards. After a month of getting creative with space, we began to want more. More room; a home office, a playroom for the kids, room to stretch out, while also “socially distancing,” etc.

It was hard to see the other end of the pandemic, when life would go back to normal, and we would head out of the home and back into the world. Demand for homes grew higher. With Covid restrictions, we were purchasing homes online and through virtual showings. Logically, interest rates should have went up, as demand was too high, and supply was too low. Interest rates slightly increased, but not enough for the consumer to feel it. With government support on student loan deferment, childcare and financial coverage while employees were out of work due to Covid, the spike went almost unnoticed to the consumer.

Where are we today?

The world has opened back up. Kids went back to school, and many of us have returned to commuting to work.

It is time for the correction to un-pause Today, in 2022, interest rates are consistently above 5%, hitting its highest spike in June. As predicted, the stock market has fallen significantly.

“In real estate, we are seeing the housing market correct itself.

Buyers are slowing down, and in less of a rush for change; they are no longer in the desperate need for more space and land as they were during lockdown,“ David continues.

“The bidding wars we were seeing in May are starting to cool, and sellers who were excited about the prices they were seeing two months ago are having to lower their expectations.

We are seeing sellers pull prices down, and begin to offer accommodations, such as improvements.”Hoffman predicts “after a difficult and frustrating time for buyers it is now their time, they have waited long enough!”

Where are we headed?

David expects inflation to calm down by the end of 2022. In the long run, housing prices will be higher than today, but after a 20-25% decline.

Most importantly Hoffman assures consumers that the economic and Real Estate climate is cyclical; we knew this correction was coming, it was just on hold.

“The housing market will continue to correct itself,” Hoffman states.

“Today, buyers are more discerning.  There will be a slight over-correction, as prices fall alight below equilibrium values  Six months ago, buyers were buying homes sight-unseen! A paint job was the least of anyone’s concerns. Today, sellers are having to make offerings where before, the buyers were the ones jumping through hoops. The market is changing, so understanding that will get you ahead of the game”.