This year has certainly been one with many twists and turns. Coming out of the 2020-2021 housing market which was fueled by incredibly low interest rates, buyers making decisions to move based on the pandemic, and the issue of not knowing what lied ahead – It created a massive demand for home purchases as consumers competed to win a sales contract and get a home with a 2 to 3% interest rate. It resulted in outrageous house price appreciation of approximately 34% nationally in just a two-year period. It boxed out many first-time homebuyers who found themselves unable to compete against buyers willing to place a non-contingent offer above full price. That was then…
As we started 2022, to say that we were braced for just about anything would be an understatement. In January, we started the year with no change to interest rates and an active first quarter; however, it quickly became obvious that change was coming – change in the form of six interest rate hikes between March and November. (I didn’t see that coming) I don’t have to tell you the shock waves that sent into our housing market. Through November, sales are now down 47% over this same time last year. In the four-county region, prices are down 13% since April, which was when the cost of money began to increase. Keep in mind that values rose 34% over 24 months, but that equity you’re sitting on now could be vaporizing if these rates continue to stay in the 6 to 7% range next year. My crystal ball is still a little foggy, but my guess is that we’ll see rates remain in these ranges for a while.
2022 started with sellers getting over asking price in a matter of days, but has now become a more ‘neutral’ market with homes taking 25 to 40 days to sell, depending on the area and price range. Yes, some sellers are still experiencing multiple offers and quick sales, but it’s not as common. The median price has gone from $620K back down to $550K, giving first time buyers hope that they too may someday be able to own a home. We’re even starting to see first time buyer grant programs with down-payment assistance again – something we hadn’t seen in awhile, so not everything about these changes in the tide are bad.
To be honest, it all depends on what your future plans in the real estate market are. If you were one of the lucky ones who refinanced during those amazingly low rates, you’re probably not too interested in trading that in for a 6 ½% loan today – hence why we continue to have inventory shortages. But situations change and stuff happens. I’m seeing people deciding to move to other states for job opportunities or a change of scenery. One thing is for sure - homes will continue to sell in our region.
Seldom do I make predictions about what will happen next for our market. There are just too many variables, but if I WERE to wager a guess… and that’s all it is… I’d say that we will continue to see decreases in home values over next year’s market. We have had a tremendous trajectory in our prices in a very short time. Now that the cost of borrowing has more than doubled, prices are flattening and in many cases we’re seeing a decline. What we experienced over the two-year pandemic wasn’t normal. Incremental increases are sustainable – the jump in value from 2020 to 2022 wasn’t incremental. It was a frenzy.
Another factor is that builders are still few and far between, providing us with enough new housing to meet the increasing demands of our local growing population. As high mortgage rates, elevated inflation and stubbornly high construction costs continue, they act as a drag on builder confidence going forward. We need stability in the market for them to jump back in.
As we close the books on 2022 and begin a fresh start in 2023, our hope is that you’ll think of us when the discussion turns to Real Estate. Whether you’re just curious, or have an immediate need, we are here to serve YOU and all of your referrals. It’s because of YOU that we continue to enjoy success in our profession and love what we do.
May the holiday season find you beginning each day with a grateful heart.
All the best to you,
Carol
