A terrible time to be looking for a house.
All it will take is one more economic blip and your 2nd scenario becomes true. Which I've read a recession is to be declared before the end of the year and it's a sure thing.
We're already have improved conditions for home buying unless you're cash poor. I know I'm in a better position than I was in March of this year. I've been working these sellers hard and they're powerless. By January through the rest of 2023, they're going to be completely at a cash buyer's mercy.
The zero-savings lemmings are out of the market. The ones that foolishly drove up their own prices, instead of pocketing the savings on 3% loans.
I'd bet on Powell fulfilling his promise to correct real estate prices to affordable levels. It's nowhere close to being done yet, so everyone that bought a house with cheap money better like what they purchased. Probably not, since in the 3% era you had about 30 minutes to decide if you were going to buy the home or not.
A lot of folks think that higher interest rates are going to result in more people sitting tight which will lower inventory, which in turn will keep prices high. But for most folks, when they sell a house, they are also buying a house. Their net effect on supply/demand washes out. The market is going to be determined by the balance between first time buyers and investors, home builders, sellers due to life events etc... More people sitting tight due to interest rate increases isn't going to save the housing market from price declines.
For example, if you were a tech worker in California, unable to eat out or go out regularly for 2 years, so you piled up cash...
And now the rest of the country looks like a good choice, compared to CA policy...
This has been a true statement since like, what, 2008?