It was not really Aunt Fannie but her chief economist Doug Duncan who concluded today that the party ended in March as interest rates have climbed 200 basis points since January 1. Fannie Mae revised new home sales for March to 709,000 from an earlier estimate of 763,000. The April figures also reflect a continued slowdown with sales estimated at 591,000. Duncan described this as a normal market response when the Federal Reserve raises borrowing costs for consumers while trying to contain inflation. A report by Realtor.com suggests that the market hasn’t lost all its steam, but buyers are now much more price sensitive.
The advice to clients in the throes of separation and divorce should be that if you are the spouse keeping the homestead and buying out your husband or wife, be aware that the market valuation or analysis you are relying on may indicate “market peak” prices. If the economy slows or the Federal Reserve continues to raise borrowing rates, the herd of buyers will shrink and prices may actually fall. It is this author’s hypothesis that Philadelphia and suburban markets may be insulated from these prevailing winds for two reasons. First, compared to New York, suburban New Jersey, and metro Washington, housing in Philadelphia remains relatively inexpensive. AND, if remote work remains in vogue, many people living along the Northeast Corridor may choose eastern Pennsylvania for property because they can commute to New York or Washington a few days a week while still living in a country where state income tax is 3.07%.
Remember that a house is not just “home”. It is an investment and a big investment. Friends who bought during the 2007 market rush will remind you that many spent a few years “under water” with mortgages that exceeded fair market value and no one to sell to.[View source.]