Let’s jump right in and discuss inventory. When do most listings come on the market? In a normal market, it would be the second quarter of each year (around spring). But the market is anything but normal right now, and showing signs that we will probably see more listings this winter than at any other time this year.
From 1985 to the 2008 housing crisis, people stayed in their home an average of 6 years. Now, coming out of the pandemic, we’re seeing that dip down representing pent-up seller demand from all those years that folks have stayed in their homes and the fact that the meaning of home has changed for many.
So what’s going on with interest rates? The overall outlook is interest rates are going to rise.
Prior to the pandemic interest rates were right around 4%. Right now, the average 30-year fixed is 3.1%. Most experts are predicting that to increase this coming year – perhaps to pre-pandemic levels of about 4%.
Looking at historical interest rates, where 2016 to 2019 were pretty normal years in real estate, we saw between 3.5% and 5%. This seems to be where we are headed for 2022.
Home prices are slightly impacted by rising mortgage rates. Looking all the way back to 2000, a rising interest rate environment doesn’t see depreciation (with the exception of the housing crisis). Price appreciation is resistant to rising mortgage rates.
So are home sales impacted by rising interest rates? Looking all the way back to 1999, we can see home sales aren’t impacted by rising mortgage rates.
Fannie Mae, Freddie Mac, the Mortgage Bankers Association (MBA), and the National Association of Realtors® (NAR) are the 4 leading providers of mortgage rate projections. They are predicting between 3.5% and 4% in the average 30-year fixed interest rate in 2022.
Now let’s take a look at the home price forecast for 2022. Forecasters are calling for an average of 5.1% appreciation in housing next year – a direct nod to seeing more inventory come in the market. We can expect relative to the housing market going into next year.
A market crash is a concern for some people right now, but housing sales are forecasted to increase this year and perform very well again in 2022.
We are in an extreme seller’s market.
The Home Price Expectations Survey forecasts $111,000 in appreciation over the next 5 years. Seems like it’s the perfect time to both sell and buy right now.