It’s not actually Aunt Fannie but her Chief Economist Doug Duncan who has concluded today that the party ended in March as interest rates spiked 200 basis points since January 1. Fannie Mae revised new homes sales for March down to 709,000 from an earlier estimate of 763,000. The numbers for April also reflect a continuing slowdown with sales estimated at 591,000. Duncan described this as a normal market response when the Federal Reserve increases borrowing costs to consumers while trying to stem inflation. A report issued by Realtor.com suggests that the market has not lost all its wind, but that buyers are now much more price sensitive.
The advice to clients in the throes of separation and divorce needs to be that if you are the spouse keeping the homestead and buying out your husband or wife, be aware that the appraisal or market analysis you rely upon may show “market peak” prices. If the economy slows or the Federal Reserve keeps raising borrowing rates, the herd of buyers is going to thin and prices may actually fall. It is this writer’s guess that the Philadelphia and suburban markets may have some insulation from those prevailing winds for two reasons. First, compared to New York, suburban New Jersey and metro Washington, Philly housing remains comparatively cheap. AND, if remote work stays in vogue many people living along the Northeast corridor may select Eastern Pennsylvania for a homestead because they can get to New York or Washington a few days a week while living in a land where state income tax is a flat 3.07%.
Remember, a house is not just “home”. It’s an investment and a big one. Friends who bought during the 2007 market rush will remind you that many spent a few years “underwater” with mortgages that exceeded fair market value and no one to sell to.