It’s usually around this time that everyone is back to work and the holidays are well behind us, prompting more action from buyers and sellers across the real estate market. This typically causes a steady pace up to the beginning of the spring market which starts in March. But this year, the excitement of buying a home is waning, so lets talk about what 2022 has in store for buyers.
As I mentioned, buyers and sellers alike are typically gearing up to go around this time now that the holidays are over, but we may be seeing a bit less activity for alot of reasons. Last year’s spring market was brutal for many buyers and caused some to just all out stop looking. The number of homes for sale last spring hit its lowest point in 40 years, bidding wars were more common than not, and home prices never slowed down.
Housing Supply
To get a sense of what will happen is to look at what economists focused on during last year’s market and that was housing inventory. We have been talking about housing inventory since 2018 and it continues to be a big focus. Even during last spring’s market, the number of homes for sale was 43% below pre-pandemic levels. With so many people, especially millennials, looking to take advantage of low interest rates, the housing supply, inventory, will really dictate how this year especially the spring and summer markets will play out.
To be honest, it does not look good. As of December, there were only about 1 million homes for sale on the US housing market. Thats down 17.5% from December 2020 and down 37.8% from December 2019, when there were 1.7 million homes on the market. This just means that the market is much tighter now than what it was when we were moving into the 2021 spring market. Simply put, if you’re a homebuyer, you might be in for more heartache.
Towards the end of last year’s spring market, we all hoped that inventory levels would rise and it did through the summer and fall. We basically thought that as vaccines became available for more and more people, especially the elderly and immunocompromised, we’d see those that were being more cautious finally feel comfortable enough to put their homes on the market. While the number of homes on the market increased, it still wasn’t enough to keep up with the current demand for homes.
This lack of inventory isn’t just sprinkled across a few markets, this shortage is a nation wide problem.
Interest Rates
One things that has been up in the air until last week was the interest rates. We’ve heard over and over again since last year that due to inflation concerns the Federal reserve was looking at increasing rates. On Wednesday, they had this to say: “With inflation well above 2% and a strong labor market, the committee expects it will soon be appropriate to raise the target range for the federal funds rate.” Later at a press conference Jerome Powell, the Fed Chariman said, “I would sat the committee is of a mind to raise the federal funds rate at the March meeting, assuming the conditions are appropriate for doing so.”
Now, mortgage rates have already been rising and because of this some homebuyers may have already been locked out of the market completely. Long term this could help slow rising home prices but in the short term, fear of missing out, could absolutely make the market more competitive. With the cost of money rising, that will cause those that may have been on the fence to finally seize the opportunity to buy while we still have historically low interest rates.
All in all, 2022 seems to be gearing up to remain a sellers market, and buyers still have a ripe opportunity to take advantage of the low interest rates available right now. If you’re a buyer or seller interested in taking advantage of the current state of the real estate market, be sure to contact me today!
Representation is KEY! 🔑
Aquontis Garlington
CalRE# 02100551
Coldwell Banker Realty
126 Clock Tower Place
Suite 100
Carmel, CA 93923
831.244.3377
Contact@Garlingtonhomes.com
Garlingtonhomes.com