“A good chunk of our down payment is caught up in that,” Rothlin said.
The couple had been waiting to see prices come down. But, so far, that hasn’t happened. The last home they bid on got multiple offers and sold for $180,000 over the asking price.
Home prices have surged in markets like Seattle and San Francisco in recent years, pushed up partly by the expansion of the tech industry and its high-paying jobs. But as the economy wobbles, those areas are likely to see the sharpest declines.
“The housing markets out West are really juiced,” he said. “If things don’t stick to script, those overvalued markets are much more vulnerable to price declines.”
Nationally, the biggest drag on the housing market has been a lack of inventory, especially at prices that first-time buyers can afford. Home shoppers at the bottom-end of the market have been stretching to make purchases, with entry-level values surging 60% since 2015, according to data from Redfin. Available listings for the bottom third of the market shrunk by 71% during the same period.
Some owners will choose not to list their properties until the crisis is over, fearful they won’t get a good price. But in a recession, others could be forced to sell, according to George Ratiu, senior economist at Realtor.com.
“If there is a marked economic slowdown accompanied by job losses, that would put a lot of pressure on homeowners,” he said. “We would see a change in the inventory situation. Instead of a severe shortage, you would start to see inventory ramp up as people get interested in offloading.”
This article was provided by Bloomberg News.