Get Ready for the Housing Market to Implode

Brian A Jackson/

Just as Americans are starting to get comfortable with the overinflated interest rates, and the housing market is starting to recover as a result, here comes more change. With a 20% surge in year-over-year pricing according to the carefully followed S&P Case Shiller price index, it was difficult for many prospective homeowners to keep up with such high demand.

Between low-interest rates and people working from home, it became impossible for people to find a home. Investors coming along offering to pay cash with no inspections, contingencies, or questions asked didn’t help either. These quick turnaround sales meant houses were not staying on the market, and if someone wanted an in-demand house, they had better well over the asking price. For those looking to use the VA home loan, many seller’s agents refused to take them and it make the market even more competitive and prevented many veterans from achieving their dreams of home ownership.

Now the days of 3% or lower mortgage rates are gone. As is affordable housing. From coast to coast the costs to rent, or sublease is skyrocketing no matter the condition. For buyers, the interest is skyrocketing and forcing the market to stabilize with artificially inflated housing prices. This means houses are once again sitting 30+ days like they had pre-pandemic, and with interest rates being so high people cannot afford to borrow to buy a house.

With the arrival of 6% and climbing mortgage rates, the once-affordable homes are now well outside the average American budget. Even people who relocated from places like San Francisco, NYC, and San Jose who had sold their homes for a premium are now finding that even with that extra money they cannot afford the house due to the mortgage rates.

A study from described just how bad the rates have gotten due to the decisions of the Federal Reserve. As of the time of their study, the September rate was 5.89% and has climbed since. “Just this increase coupled with higher prices makes the median monthly mortgage payment nearly two-thirds, 63%, more expensive than the same time a year ago and more than three-quarters, 78%, more expensive more than two years ago.”

Just seeing how much the interest rate effectively increases the costs of a mortgage payment is incredible. For those who were not old enough to remember the mortgage rates of 1981 when interest rates hit a whopping 16.63%, or the end of the decade at 10%, they forget just how bad it can get when you see home prices even now.

Three of the hottest areas for price jumps Boise, Miami, and Tampa are expected to see some of the first real corrections, and some of the biggest. Boise is relatively new to overpriced real estate. They received the effects of the 2008 housing crash and they saw the losses firsthand. Until the emergence of remote work back in 2018, and it’s huge surge via COVID in 2020, Boise was able to maintain a rather flat and reasonable housing market. So, people were able to still enjoy those pinch prices to a degree.

However, Miami and Tampa never really felt that pinch. For the last 60+ years, there has been a steady stream of people retiring to either location from up north. The housing market could crash or skyrocket, but people were willing to pay the price to make the change.

Now cities are expanding even more and new housing is being built all over the state, so there is no shortage of choices for people. Coupled with the sky-high interest rates that have nowhere to go but up for the foreseeable future, the market has no choice but to correct itself and for housing prices to go back down. The only question left to answer now is just how far will the prices plummet, or at some point will people just hold and wait?