Housing In The Remainder of 2022
For those looking to buy or sell their house, this can be an exciting time to be in the market. With such a large decision that is buying or selling your house, there is always some factors that should be considered before fully committing to your decision. One of the most important of these factors is based on timing. This is because the market is in for a drastic change from what we have seen over the past few years, but how long it will take to play out is the question. What does the rest of the year have in store for the real estate market? Here is what experts are predicting for the housing market in the remainder of 2022.
Homes For Sale Will Increase
The biggest reason we have seen such a tight and aggressive real estate market this year and last is because of inventory. With 2021 ending at a record low in terms of homes on market, 2022 has been much of the same. Homes for sale have increased, but only in certain price ranges. The entry level homes that are move-in ready and priced right in the right location are still selling within days. However, housing in the remainder of 2022 should show some signs of inventory relief. The past months have seen an increase in homes on market, showing a growing inventory, even though it is still significantly below the average. According to Danielle Hale, Chief Economist at realtor.com:
“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.”
For buyers, this will allow for more options and more flexibility in your process. However, it is still important to understand that we are still in a market with very low supply and very high demand. Buyers should still be looking to put up their best offer that they are comfortable with offering.
For sellers, more inventory means more competition. As of right now, sellers are receiving multiple offers at or above list price. This trend will likely look to slow coming into the end of the year. For those looking to list their homes, now might be the best time to do so in terms of competition. Right now, you have the best chance to have as many eyes as possible to look at your home.
Mortgage Rates And The Housing In The Remainder Of 2022
Mortgage rates will continue to increase according to the Federal Reserve’s campaign to tackle decades high inflation. Experts agree that higher inflation will lead to higher rates, and mortgage rates are a key factor in affordability. While the rapid increase we saw in mortgage rates to start the year is likely over, rates will still increase moderately before the new calendar year. Odeta Kushi, Deputy Chief Economist at First American says:
“… ongoing inflationary pressure remains likely to push mortgage rates even higher in the months to come.”
For buyers, a higher mortgage rate does limit you in this market. Affordability is getting squeezed at record levels. This is because of inflation in prices from basically everything in and around the housing market. Even an increase in gas and food prices limits your ability to buy a house. With mortgage rates also climbing alongside prices of everything, money will be harder to borrow and less likely to be able to afford what you could before.
For sellers, mortgage rates are rising, some are being motivated to sell before they get too high. However, this is also discouraging some sellers from moving in general. Some sellers are discouraged to sell their house with all this new equity at a lower rate. I believe that sellers will also stop listing their homes as much, which could equal a harder inventory landscape.
Home Prices Appreciate. . . Again
Home prices are likely going to continue to rise, alongside mortgage rates. This creates an affordability squeeze for buyers, and makes financing more of a fragile topic. There are still fewer homes available than buyers on the market, so this can lead to a price squeeze too. The pace of price appreciation should slow into the second half of the year, but home prices will likely not fall. After all, it is still a supply and demand issue. Lawrence Yun, Chief Economist at NAR (National Association of Realtors) says:
“Prices throughout the country have surged for the better part of two years, including in the first quarter of 2022. . . Given the extremely low inventory, we’re unlikely to see price declines, but appreciation should slow in the coming months.”
As a buyer, continued increases in home prices means it will cost you more to buy the longer you wait. If you couple this with increasing mortgage rates, you may be priced out of certain homes now. Those who were looking for a $250,000 house is now more likely to be stuck looking around the $220,000 range based on higher prices and mortgage rates. This can create a hairy situation, and might limit your upside potential in the near term. However, real estate is historically a good long-term investment and a hedge against inflation.
As a seller, home price appreciation makes you richer. You are able to get more value back for the home you are selling than what you bought it for. Homeowners are sitting on record high equity, leading to record high net worth. Selling now might result in your best deal and best possibility to make the most money.