Posted on July 12, 2022
How Is the Housing Market Right Now?
How Is the Housing Market Right Now? 2022 Trends to Watch
The economy has everyone on edge lately. Gas prices are through the roof, the stock market is tanking, and food prices are incredibly costly. On top of this, the war in Ukraine doesn’t seem to be letting up. As a result, all these factors seem to be sending a ripple effect on costs throughout the globe. With so much gloom from the greater economy, it is comforting to see that home sales are still increasing at a moderate pace. But the current housing market isn’t perfect on both sides of the spectrum. Some buyers are still missing out on buying opportunities due to intense bidding wars, losses to cash buyers, low inventory, and other issues. On the flip side, sellers are still enjoying a strong seller’s market. Although much hasn’t changed since last year, a few factors may start to turn the tide of the current housing market later in the year and as time goes on. Here are a few trends to watch for the rest of 2022, especially if you consider buying a house with cash.
Higher Priced Homes May Increase in Supply
If you have been looking for homes in your local market priced under $500,000, chances are you haven’t seen many. The inventory for houses under this price point is meager, and seemingly everyone wants homes in this price range. This has increased the availability of homes higher than this price range. So shifting your interest to homes in a higher price range could help you finally get a house. The only drawback of this plan is that there may be some issues with qualifying for a mortgage at a higher rate. While you may not be able to change how much a bank loans you, increasing your own out-of-pocket cash for a house may help you acquire a home. Thus, buying a home will be more expensive than you’ve probably budgeted.
Homes My Not Sell As Quickly as Last Year
The last few months of 2021 had deficient inventory levels for houses because they were selling relatively quickly. Most homes were averaging about 21 days on the market in most states. This trend may start to change a bit this year due to increased interest rates and increased home prices. These changes may slow down the rate of home sales minimally and reduce the competition. Unfortunately, this may be bad news for those who need to move or those who are new home buyers. The market trends seem to favor those who can afford homes at a higher price point.
Foreclosures May Be on The Rise
Another wild card that may pump the brakes on the selling market is increased foreclosures. In the last few years, the pandemic halted a lot of foreclosure activity because home loans, especially those backed by the government, were offering forbearance plans to help homeowners cope with the crisis. As these forbearances end, homeowners who are still suffering from financial issues that don’t have a course of action will have to relinquish their property. The only saving grace that most homeowners facing foreclosure may be able to secure is working with home investor companies that can buy their homes as-is. They specialize in working with distressed homes and buyers in dire financial situations such as facing a foreclosure. Otherwise, this will inevitably be a rising trend that could add another layer of suspense to the housing market and the overall economy.
Bidding Wars May Ease
As this year goes on, you may start to see less of “armies” of potential home buyers lined up ready to buy a home. Intense bidding wars could be a thing of the past as home prices and mortgage rates increase. While it will still be a strong seller’s market, there may be less for buyers to fight about if sellers decide not to sell at all. A recent report conducted by Homelight has discovered that some sellers are starting to opt to stay where they are amidst all of the global insecurity. Therefore, higher prices and reluctant sellers may decrease buyer aggression and even send them elsewhere looking for places to stay. Renting could be an option for some as this housing shortage crisis continues. But new home construction may be another place where home buyers, especially new ones, start looking for their pot of gold. As of February of this year, new home construction climbed 22 percent, up drastically from new home building from last year. Unfortunately, supply chain problems and labor issues contributed to the low inventory of new homes. Consistent increases in this segment may be a game-changer as the year continues.
Mortgage Rates Will Increase to Help Combat Inflation
The mortgage rate for a 30-year fixed-rate mortgage is at about 5.25, moving down a few points within the last few days due to the current economic crisis. It was below 3 percent a little over a year ago. However, many experts predict that the mortgage rates will continue to rise by the end of 2022. The higher interest rates mean buyers will have to pay more money on their mortgage each month. As a result, buyer purchasing power is eroding. While mortgage rate increases may help stave off inflation, this could create reluctant buyers. Higher costs and reduced purchasing power may be another blow to the buyer in a market that is favorable to sellers. Pricing buyers out of the market could decrease demand for housing. Thus, as the year goes on, the housing market may cool off a bit from what we’ve seen in recent years following the pandemic.
It’s still too early to determine how these changes will affect the market. But this could be the beginning of the end of a scorching home selling market. Some expect the housing market to begin a trend toward normalizing, which will culminate around 2024. That is when we may start to see buying and selling trends start to favor those in place before the pandemic. In addition, an improvement in inventory over the next few seasons will begin to usher in the change. Until then, we’ll have to see how the housing market takes shape as the year continues.