Is the housing market headed for a crash? Probably not. Let's just get that out of the way.
While it's true that today's sky-high home prices simply aren't sustainable, buyer demand has held fairly steady over the past few months, even as mortgage rates have risen sharply. And a big reason demand is likely to remain steady is that housing inventory is extremely low.
But still, it's fair to assume that home prices will decline over the next few years. Whether we see a notable downtick in prices at any point this year is yet to be determined. But if you're worried that home prices will drop sooner rather than later, here are three essential moves to make now.
1. Get a listing together if you're looking to sell
Maybe you're looking to downsize your home and move to a smaller space. Or maybe you're a real estate investor who's tired of managing a rental property and is looking to free up cash to put into other projects.
No matter your specific circumstances, if you have plans to sell in the not-so-distant future, it pays to get your listing up sooner rather than later. Right now, we know buyer demand is still strong and that housing inventory has only increased modestly on a month-to-month basis. We don't know whether there will be an influx of homes to hit the real estate market later this year (perhaps over the summer), so a good bet is to sell now while the market is still unquestionably hot.
2. Take out a home equity loan or line of credit
Because home values are up across the board, property owners are sitting on record levels of equity. And that's something you may want to capitalize on -- especially if you buy into the narrative that the U.S. economy is headed for a near-term recession.
If you don't have a specific need for cash but want to leave your options open in case economic conditions sour, a home equity line of credit (HELOC) is a good bet. But if there's a renovation or repair on your radar, you may want to consider taking out a home equity loan.
The upside of a straight-up loan is that you'll get to lock in a fixed interest rate. And at a time when borrowing rates have the potential to rise, thanks to rate-hike plans on the part of the Federal Reserve, that's a good thing.
3. Consider a cash-out refinance
While borrowing rates are much higher today than they were at the start of the year, a cash-out refinance could still make sense for you -- especially if you want to capitalize on your current level of home equity. Also, if the mortgage rate you locked in initially wasn't so great, you may find that you're able to reap savings even with borrowing rates being higher.
Act now while you can
Home values are unlikely to sink at a rapid pace anytime soon due to the state of the housing market. But do home values have the potential to decline gradually? Absolutely. And that's likely to happen, given how ridiculously high they are today. If you're worried about that happening, it pays to consider listing your home, borrowing against its equity, or doing a cash-out refinance while those moves still make sense.