The housing correction that we have been talking about for the past two years is finally here. Over the last six months, inventory levels have steadily risen across all price ranges. This has given people more options when it comes to finding a home they want to live in.

In fact, according to data from realtor.com®, there are now nearly 6 million fewer homes listed for sale than there were at this time one year ago! And with houses going up in value, many homeowners are choosing to list their house as “For Sale By Owner” (or MLS LISTED) rather than actually listing it online or through other channels like Realtors.

While having so many listings can seem comforting, it also means that demand is higher than ever before. It takes longer to find your dream home if you're looking actively, which can be frustrating for most individuals. If you've had your eye on the right neighborhood and house type for a while, waiting may not work in your favor.

It's important to remember that although the market is improving, it will still take some time until things really pick up. In the meantime, be patient, spend prudently, and make sure you understand the different types of mortgages so that you don't put yourself into too much debt.

Rising interest rates

The housing market has been experiencing something of a correction for quite some time now, but it has recently hit another level. Starting early this year, we have seen rising mortgage rates which make owning a home more expensive.

Rising costs are putting pressure on people who want to purchase or refinance their current residence as well as those looking to buy a new house. People are also choosing to postpone buying a house due to the cost.

While higher rates can be frustrating for individuals that own a home, they will probably work in your favor. If you happen to be among one of these individuals, there are ways to take advantage of this situation!

We will talk about some strategies here so that you do not need to spend money to stay within budget. Even if you are facing high monthly payments already, you can find ways to lower them even further by exploring our tips.

Rising home prices

With the housing market slowly recovering, rising house prices are becoming more of a norm rather than a exception. Home price rises have been happening for some time now as sellers’ motivation to reduce their property inventory has slowed down.

This is due to two main reasons. The first is that many homeowners choose to hold onto their homes longer because they want to be able to live in them and not sell until they find something else. This is sometimes referred to as ‘housing wealth preservation’.

The second reason is that even if someone does decide to put their home up for sale, there aren’t very many other options available to them at this stage of their lives. They might also believe that their home will retain its value better than buying somewhere new.

Both of these factors contribute to what most people consider to be a relatively stable situation for houses. However, it can mean that we’re still experiencing a pretty significant correction when it comes to how much people are willing to pay for a house.

There is no doubt that we are heading into a period where owning a home will be less affordable for average earners, but the timing and intensity of this correction vary quite a lot depending on which area of Australia you look at.

Rising mortgage rates

With more people having access to mortgages and houses being less expensive due to strong housing market fundamentals, there is now significant competition for home loans.

This has resulted in higher average loan amounts as well as longer terms. The average 30 year fixed rate mortgage today is 3% lower than it was at this time last year, but it’s also 2% higher than what it was back in 2011!

Rising interest rates are one of the biggest headwinds facing homeowners right now. They could easily become the big surprise that pushes up the cost of owning a house beyond the affordability range for many individuals and families.

If you're in the market for a new home, be aware that prices have been going down in most markets around the country.

Rising inventory

With more homes for sale than there are buyers, the housing market has entered its most serious state of correction since the Great Recession.

The number of houses sitting empty is at a five year high, with one out of every two residential properties being held without any intention to sell.

This oversupply of listings means that home sellers require strong price incentives to attract potential buyers, making it harder to find your house.

In fact, according to Zillow’s latest State Of The Market Report, the average time on the market now sits at 80 days, up from 70 back in April. This is almost three months longer than last year at this same time!

It seems as though many homeowners have given up and decided to list their property for sale after putting off buying or selling for so long.

While this may seem like a bad thing, it actually gives those looking to buy some extra time to do research and determine if this is the right place or person for them to invest in a home.

By having more time, they can also look into whether or not they want to be in this market just yet, or if now is the best time to purchase.

If you’re thinking about investing in real estate or trying to find your next home, make sure to do your research and understand what markets are like now before deciding where to focus your efforts.

Rising home sales

Recent trends indicate that more homes are being sold than ever before! This is particularly interesting given how much inventory there was just one or two years ago. Back in 2016, there were 6 million homes for sale nationwide, which made it very difficult to find your dream house.

Now, only 2.8 million properties sit on the market across all price ranges. That’s about half of what we had last year!

All major markets have seen significant drops in listings over the past twelve months. In fact, this fall has been so drastic that some experts refer to it as the “Stress Test” because it appears to be putting pressure on would-be buyers to make decisions quickly.

If you’re thinking about buying a house, now may not be the best time to do so. There will almost certainly be houses available soon, but competition for those homes will increase as well.

Rising bankruptcies

Recent data indicates that home owners are now more likely than ever before to file for bankruptcy due to rising mortgage debt. In fact, experts say we’re already at or near all time highs when it comes to homeowners filing for Chapter 13 protection — a less expensive option than liquidation if you can afford to make your monthly payments while restructuring your debts.

Chapter 13 allows borrowers to keep their homes by requiring them to put money into a fund to pay off creditors. This way, they retain some of their assets so they do not have to sell their house completely.

It is important to note that there is no federal requirement to use this protection, which means many people choose not to. Most individuals with credit issues cannot get enough funding through other legal channels, making the chapter 13 safety net available to those who need it.

Furthermore, since most mortgages include a clause that gives lenders first dibs on a homeowner's property if they go under, using the protections given by Chapter 13 can help mitigate financial loss.

Rising unemployment

The housing market has been experiencing something of a correction since late 2016 when home prices began to drop. That correction is now in full swing as homes are gradually being priced down and inventory is expanding. This comes after home price peaks in some markets such as those with very little supply and skyrocketing demand due to strong employment levels.

With more people looking for jobs and higher competition for positions, employers are having trouble filling their open positions. According to CNN, there were just 5 million job openings across America in March 2018, which was 300,000 less than what we saw in November 2007 before the Great Recession hit!

While it’s great to have more jobs available, this can also mean that workers are earning lower wages because employers don’t have enough employees. In turn, they are choosing to pay lower salaries, resulting in weaker income growth for individuals and households.

In fact, according to Freddie Mac, average wage growth currently sits at its lowest level in over six years. It took around two months for earnings to grow by one percent past inflation in February, making it the slowest increase since September 2012.

Since most people spend whatever money they earn (on rent or otherwise), weak income growth impacts how much you get to spend. And since many families rely heavily on their monthly paycheck to make ends meet, growing uncertainty about your income puts pressure on them to cut back spending.

Reasons why the housing correction has lasted so long

The reasons that the housing market has taken longer than expected to correct itself are many. Some say there’s just not enough clear liquid real estate to make up for what was lost during the bubble era; some argue that even after the most recent downturn, house price levels remain too high; and others claim that due to the popularity of homes with large lots and/or waterfront properties, people still feel entitled to their own piece of the American dream.

All three of these factors play important roles in creating overhanging demand in our current housing market. In fact, all three have been at work since at least 2013!

Given this, it is very likely we will see the housing market continue to evolve well into 2020. It is also possible we could see another round of more substantial declines before things fully level off.

Takeaways: Even though the housing crash happened almost ten years ago, there are still significant ramifications today. Make sure you're prepared by checking out our article here about how to be ready when the next downturn comes.

Please contribute, comment on our blog post and lets make this fun active housing bubble forum. Please send us your ideas for our next housing market bubble blog!