You know that time when you’re about to sneeze when your body has pulled in so much air your lungs are about to explode but before the actual sneeze? That’s what the May 2022 market felt like. Is it the pause before the market crash? Will prices suddenly come falling back to Earth? Will the house you just bought in March suddenly lost 20% of it’s value.
The market has absolutely calmed down since interest rates began to rise towards more historic norms (remember, the average interest rate for a 30-year fixed is 8%), and it’s causing buyers sticker shock. Will this last? No. I’m giving it 6 weeks before people remember they need a home.
The geniuses who predicted “transitory” inflation are now giving us a 50/50 chance of hitting a recession before 2024. A recession is technically defined as 2 consecutive quarters of negative Gross Domestic Product (GDP) growth. The US GDP contracted by 1.4% in the first quarter of 2022, I’d speculate we’re in the middle of a recession. How long it continues I don’t know.
“But John, you trustworthy yet mysterious renaissance man,” I hear you ask, “surely a recession will cause the market to correct.”. Well, dear reader, there are quite a few different types of buyers out there, and many of them view real estate a safer investment than the stock market right now, and they’re putting their money into it. There are also buyers about whom I’ve discussed ad nauseum, namely buyers who sold their Malibu CA shanty for $2.5 million and are giddy with the affordability of DFW real estate. Without them, higher interest rates and an economic recession would likely send DFW into at least a static market.
As I’m writing this, it’s been 24 hours since the shooting in Uvalde. If you’re able, I’m sure there will be relief charities for the families of the victims. If you hear of any, please let me know and I’ll share it on social media. I don’t often chime in social media during tragedies, I’ve learned emotional comments tend not to age well.