Economic Uncertainty and How it Affects Real Estate

Today’s economy has many of us a bit unsettled. Persistent inflation, stock market volatility and the prospect of recession have given homebuyers and sellers more to think about as they consider entering the residential real estate market. When asked “how’s the market?,” as we regularly are, we have these thoughts in response to today’s economic uncertainty:
If the U.S. is, in fact, currently in a recession, it has certainly begun differently than in previous experiences. The strong job market and labor shortage has precluded the increase in unemployment that typically occurs during a recession. So that’s one less thing to worry about.
Like politics, all real estate is local. The DC metro area, with its government-dominated economy, has always been protected from macro, national economic downturns. For example, many areas in our region did not experience the sharp decrease in home prices (and foreclosures) that much of the nation experienced in 2008. It is reasonable to believe that we will be similarly protected from some of the worst adverse effects of a national recession.
To combat inflation, the Federal Reserve has increased interest rates in recent months, and this has certainly impacted mortgage rates. Freddie Mac’s weekly survey shows mortgage interest rates increasing from 3.0 percent last Christmas to 5.3 percent in early July. Thankfully, rates seem to have stabilized in the 5’s at this point, still low by historic standards. We’ve seen some evidence that the increase in rates has softened the market a bit; we certainly monitor this regularly to provide the best information to our clients.
In light of the unsettling economic times in which we live, we continue to recommend that homebuyers and sellers look beyond the immediate present when assessing the best time to buy or sell. We take the “long view” that decisions on residential real estate should consider the entire length of ownership, while always prioritizing your individual or family circumstances.

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