A shift In The Market: What You Should Know

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Real Estate


I'd like to share with you market information that might help you evaluate if it’s time for you to sell your home. Leading indicators point to a shift in the real estate market. Here are some of them and how they would have an impact on you getting the maximum equity on your home.

  • Interest rates are expected to continue rising in 2022 - Rates have gone from 3.3% this time last year to 5.25% (as of this writing). Four hikes have been taken in 2022 so far, and more are expected. Both sellers and buyers are impacted by rising rates. Affordability erodes as rates and mortgage payments rise. 
  • Inventory is low, yet buyers seem to be fatigued - In a survey by Fannie Mae, 73% of buyers do not think it’s a great time to buy. Part of that is because the inventory is so low. Sellers who put their home on the market get it sold quickly. For now, anyway.
  • Negative economic conditions exacerbate the situation - Housing costs have surpassed wage growth and inflation by more than double over the past decade. Today's high inflation rate only furthers the problem. Residential real estate is a hedge against inflation as long as affordability doesn’t deteriorate further.

We’re in a unique situation right now where home prices have grown in double digits the past two years, so most people have sufficient equity. Inventory of homes for sale is at very low levels, so homes for sale are in high demand. It’s still a “perfect storm” for home sellers. How long will it stay that way? Probably not much longer. If you’re even thinking about moving and cashing out your equity, all signs point to now.

Many economists are forecasting a real estate market that’s cooling off. Some indicators, when taken together, might point to the validity of the prediction. Knowing what may happen can help you better prepare yourself and your clients.

The Facts

  1. Existing and pending home sales have dropped - NAR


  1. Monthly mortgage payments have risen by 28% from a year ago - Home Buying Institute


  1. 73% of respondents said now is not a good time to buy - Fannie Mae


  1. Affordability is the lowest in 15 years - Black Knight


  1. Interest rates are expected to rise again in 2022 - Reuters


  1. 73% think the economy is going in the wrong direction - Fannie Mae


Yes, inventory is still at record lows, keeping those with enough money purchasing. Many would-be home buyers won’t be in such a situation. And the “lock-in” effect will hit existing homeowners who have a greater disincentive to move and replace their current mortgage that likely has a lower fixed rate.

Quotable Quotes

"There will be an inevitable slowdown in home sales. Keep an eye on DOM and a decrease in multiple offers. Home sellers should not expect big easy profit gains."
Lawrence Yun, Chief Economist with the National Association of REALTORS

“If consumer pessimism toward homebuying conditions continues and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast.”
Mark Palim, Deputy Chief Economist, Fannie Mae


Ready to make a move lets chat!