Rumors, Speculation, and Fear, but could a housing crash be looming?

by John Reuter

Over the past few months we have seen a lot of headline stories about the real estate market and direction it’s heading. Many homeowner’s who owned a home during the house crash of 2008 fear they could be in for another rude awakening. Our goal in this short blog article is to provide you the facts of the housing market, and provide our opinions on the current state of the market.

Fact #1: Mortgage delinquency rates are the lowest they have been in over 22 years. Currently only 3.45% of homeowner’s are 30 more days delinquent on their mortgage. In comparison, during 2000-2005 the delinquency rate was over 4.25% and in 2011 that percentage was just under 15%. During the COVID-19 initial outbreak the number of people behind soared to over almost 9%, but the majority of those who were behind are now caught up on their mortgage.

Fact #2: Home equity in the United States is arguably the highest it has ever been. The average homeowner in the U.S. has $185,000 of equity.

Fact #3: 42% of homeowner’s owe less than 50% of what their homes market value.

Fact #4: Interest rates have increased, but now have leveled off! We were seeing rates around 7%, and are now seeing rates around 5%.

Opinion: The home prices will start to level off, and some more rural areas may see a little decline. The reasoning is during the Covid-19 many home buyers were able to work from home, but we have seen many large employers in the Dane County area recently start to bring people back in to the office. Many are still allowing people to work from home, but the number is slowly declining. In Dane County and surrounding counties we are still seeing homes that are going for over list price with multiple offers. The amount of offers per property has gone down. Last year we were seeing 10, 15, or maybe more offers on a home. Now we are seeing 2-5 offers. The housing market in and around Dane County will stay steady as we have a lot of great employers, with other employers looking to building/move their corporations to the area. The demand for housing will stay strong, and the amount of buyers looking to purchase will still out number the amount of homes on the market. The largest impact I have seen so far in Dane County and surrounding homes is homes that are priced above $750,000 are staying on the market a bit longer than what they were a year ago. My belief is that many home buyers in this range bought their current homes 2-5 years ago and have interest rates between 2-4%. For those buyers to ‘move up’ with the current rates, they are going to pay substantially higher amounts per month. Homes under that $750,000 mark are still selling quick as long as they are priced correctly. Overall, I think for home buyers in Dane County and surrounding areas we are in a good position and things are going to remain steady for the next couple of years.

Current list of foreclosures and short sales in South Central Wisconsin as of 31 January 2023 >>> Current Foreclosures