The Stock Market’s Impact on the Housing Market

At the end of 2021 and the beginning of 2022, the housing market was filled with cash buyers offering way over a seller’s asking price, making the market incredibly competitive and favoring sellers. But, as the federal government increased interest rates in March 2022, the economy slowed down, and the housing market shifted into more of a buyer’s market despite high-interest rates.

According to the U.S. Bank, “While the Fed’s interest rate hikes are designed to slow the economy, few segments of the U.S. economy felt the impact of this policy as rapidly as the housing market.” Over the last few years, the housing market has fluctuated and shifted because of the stock market, which ultimately translates to changes in the U.S. economy.

Despite high borrowing costs, property values started to fall, allowing buyers to pay less than the asking price for a home. Even with the increase in interest rates, many buyers are starting to borrow more land loans from banks, and seller carrybacks are increasing as the market shifts toward buyers.

What is a Seller Carryback?

Seller carryback, also known as seller financing, allows sellers to finance their property on behalf of the buyers, making the buyers pay back the principal amount and the interest money to the supplier over a certain time. According to WallStreetMojo, “The buyer must make a down payment, which is usually calculated as a specific percentage of the selling price of that property.” Financing from a seller can benefit buyers who have issues with credit, income, etc., and allow them to pay the seller directly.

Seller carrybacks broaden the market for buyers and are an excellent investment for sellers because they make 5-7%. Normally, WallStreetMojo reports, seller carrybacks are executed and recorded on a preliminary note. This owner-financing contract contains all the terms and conditions of the transaction, including amortizations, interest rates, etc., and is carried out under legal guidance.

The Future of the Housing Market in 2023

Despite the stock market’s impact on the housing market, buyers, sellers, and real estate agents are starting to see a turnaround as seller carrybacks are becoming more popular and buyers are beginning to get land loans from banks. WallStreetMojo finds that “[m]ortgage rates have slowly fallen. After peaking in November 2022 at 7.08%, the average 30-year mortgage rate in the U.S. dropped to 6.09% in early February 2023.” The slight decrease in mortgage rates is an encouraging sign for buyers looking to finance a home purchase and sellers looking to put their house on the market in 2023.

In conclusion, the housing market can be unpredictable, and unforeseen factors can always come into play. While it is true that the stock market can have a significant impact on the housing market, the relationship is not always straightforward. Many factors, including interest rates, economic growth, and consumer confidence, can influence both markets.

However, it is clear that the stock and housing markets are interconnected, and movements in one market can have a ripple effect on the other. Investors and homeowners should know these relationships and stay informed about market conditions to make informed decisions about their investments and properties.

With that being said, are you looking to purchase your ideal parcel of land to build your first custom home in Tucson, Arizona? Contact me, Rick Sack, at 520.918.5477 or rick@buytucsonlots.com, and I’ll help you find the best lot of vacant land for you and your family.

Sources:
https://www.usbank.com/investing/financial-perspectives/investing-insights/interest-rates-impact-on-housing-market.html
https://www.wallstreetmojo.com/owner-financing/#:~:text=Owner%20financing%20in%20real%20estate,supplier%20over%20a%20certain%20period.

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