The year 2022 has been quite busy so far. Events are happening all around the markets, from the cryptocurrency and stock markets to the real estate market. The Federal Reserve is hiking rates, news about wars, talk of an impending recession, and then inflation rates rising by the second.
Is it still a good time to be in the real estate market? Let’s examine why others have postponed their home search or abandoned it entirely.
The Mortgage Rates
Due to the Federal Reserve's reaction to increasing inflation this year, rates have increased by more than 2%. Mortgage rates are likely to rise if inflation continues to grow.
“Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be” - Greg McBride, Chief Financial Analyst at Bankrate.
With a nearly 50% increase in the monthly payment since last year, people are not rushing to buy a house; on the contrary, according to Redfin, one of the most popular real estate companies, nearly 15% of the people who signed a contract in June, are backing out of the deal, not being able to finance their payments.
With divided opinions, most experts say that even though we shall not see a severe spike in mortgage rates, they will continue to go up moderately due to inflation.
Inventory rise
Due to higher mortgage rates, buyer demand drastically decreased compared to the last two years, leading to house sales slowing down, increasing inventory.
“The gap between this year’s homes for sale and last year’s is one-fifth the size that it was at the beginning of the year. The catch-up is likely to continue. . . This growth will mean more options for shoppers than they’ve had in a while, even though inventory continues to lag pre-pandemic normal.” Chief Economist Danielle Hale says.
Over the past two years, increasing demand for homes has resulted in a scarcity of properties to purchase, driving up prices. The first inventory improvement in three years occurred in June, where according to this Jacksonville property management company, the number of homes for sale at the end of June was up 9.6% from May and 2.4% from a year ago.
According to realtor.com, their inventory growth expectations have increased dramatically, jumping from 0.3% at the start of the year to 15.0% by the end of 2022.
This is very good news if you’re in the market for a new home, having less of a competition in buying the house you want and also having more options that meet your standards. But things are not ideal, as the housing supply is still low, forcing you to move fast and stay on top of the offers.
How will the price move in the upcoming months
Homeowners and real estate agents often use the median price of a home to estimate the midpoint value of homes in a neighborhood. In September, this price reached a record high, estimated at $427,000, up 13.4% compared to the previous year. Also, in September, the average house price in the U.S was $701,989.
All things taken into consideration, despite the fact that the house supply is growing, there are still more potential buyers than houses for sale. Combined with an apparent underproduction between 2008-2020 and increased demand since 2020, this is the reason why home costs continue rising. However, economists believe that the pace of growth should slow but not decline.
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices,” says Deputy Chief Economist Selma Hepp.
With a lot of people trying to predict how the housing market will perform in the upcoming year, the experts at the National Association of Realtors ( NAR ) and Freddie Mac predict that the sales will either slow down to 5.4 million or they will not experience any increase. Regarding the price, its growth will lower to an average of 2-4%. All things considered, by the end of the year, things are not looking like they are going to change.
Conclusion
No matter what your marketing intentions are, whether you are looking to buy or sell, you need to be well-documented and briefed with all of the latest news to ensure you’re making the best decision possible for your situation.
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