There’s so much speculation in the market right now.
Lots of speculation, but when it comes to real estate, inventory will be the market indicator. The bad news is that listings are at record lows. This is for a variety of reasons: low rates, the changing definition of “home,” and perhaps the desire to own a home.
Realtor.com looked at housing inventory year over year (December 2020 to December 2021). Where the national average is down almost 27% year over year, and Florida is one of the highest at down over 48% – a significant lack of inventory across the country. Real estate will not be able to reach its market potential, because you cannot sell what you don’t have.
Going all the way back to January 2019, looking at the Months Inventory of Homes for Sale, we see supply start to dip down in 2020, spike up during lockdown, and then deplete since then with record lows in December and January last year (under two months’ supply) – a number not too far off from where we are now.
On the other hand, buyer demand is not slowing. Showings are still strong, according to ShowingTime. This is a leading indicator of activity, because if people aren’t scheduling showings, then those don’t turn into contracts, and ultimately sold deals. Showings still continue to crush pre-pandemic numbers.
Where 2017, 2018, and 2019 are the “normal years” in real estate, we can see activity is still very strong this winter.
No doubt buyers are out there are in force, motivated by a number of different things: rising rates, or different needs in a home.
Those showings are turning into deals – pending deals. Sales are higher than pre-pandemic numbers as well. The market is moving, and would have even greater momentum with more inventory.
People are looking at their home equity and considering doing something different. Everyone should know how much equity they have in their home.
CoreLogic’s third quarter home equity report showed that the average homeowner with a mortgage gained $57,000 in equity – 31.1% year over year percentage for increase in equity for homes with a mortgage in the United States with a total equity increase of $3.2 trillion. Home price growth reached its highest level in more than 45 years, pushing equity gains to another record high.
Across the country there is an average gain of $56,700 in equity – $64,000 in Florida.
The ability to build wealth through equity is one of the greatest benefits of home ownership.
Fannie Mae, Freddie Mac, the National Association of Realtors® (NAR), and the Mortgage Bankers Association (MBA) are predicting between 3.5% and 4% in rates for the second half of the year. We are seeing an upward trend, with rates likely to settle where they have been over the past 10 years – between 3% and 5%.
Forbearances have finally fallen below one million – that represents about 1.6% of active mortgages. Four out of five homes that are coming out of forbearance have a repayment plan. And let’s not forget the $57,000 average gain in equity in the last year – those in forbearance likely have opportunities.
We all know that pricing has peaked. Looking at the Federal Housing Administration (FHA), CoreLogic, and Case Shiller price acceleration predictions (year over year) back to January 2021 starts out at 10% where we peaked around 19% in July. However, over time we will likely return to the average of about 5%. A situation in which homes will continue to appreciate, just at a slower, more moderate rate.
The home price appreciation forecasts for 2022 average 5.2% – anywhere from 7.5% to 2.8%.
Overall, this year looks as if it will be a strong year for the real estate market.
