Tough Times Ahead?
By Jim Palmer Jr.

Stories of doom and gloom concerning the future real estate market seem to monopolize conversations these days, and doomsayer’s predictions are brimming with adjectives designed to strike terror in the hearts of those who would be swayed.  “It is destined to crash!” they exclaim with conviction.  They tell a compelling story when considering the fact that interest rates are over 6% now and appear to be creeping even higher.

Yes, times are much different than they were just a couple of years ago when we were experiencing a booming economy.  Real Estate brokers experienced a glut like we have not seen in many decades, if ever before.  Now, with interest rates climbing, many first time buyers are eliminated from participating in the buying process simply because they can’t make the payments with rates so high.  At the same time, many of us remember and compare the days of 13-15% interest rates that we experienced in the early Eighties.

The pessimists among us fear the worst and are bracing for the next big crash by curtailing purchases, while the optimists, including myself, are concerned but not convinced of that worst case scenario.  We call what is happening in the market “normalizing” rather than crashing.  The recent intense rise of prices and lack of inventory created an crisis in the supply chain that could not be sustained.  Lumber prices doubled, and then tripled while suppliers struggled to keep up and deliveries ground almost to a stop.
September statistics provided by the Spokane Association of Realtors® show that while inventories are up (1.8 months of inventory available, instead of 14 days), closed sales are down by over 28% from a year ago.  Even with those statistical reversals, the median sales price is up by over 7% from a year ago.  I expect to see that number drop significantly in the next year, though I don’t believe that market correction will dip to a level which pessimists can justifiably classify as a market crash.

With gas prices rising virtually every day, we all expect that other goods and commodity prices will continue to rise as flames of inflation are fanned by unnecessary government spending and intentional throttling of supply chains.  But despite raging inflation, most home owners are buffered from harsh effects of a crash because of significant reserves in home equity, which differentiates these tough times from the debt laden 2007-2008 crash.  Tough times ahead?  Probably, but not an all out market crash.