2022 might be best characterized as a year of rebuilding. After two years of the pandemic, 2022 brought an international lifting of restrictions and a new sense of normal. In the real estate sector, this year was marked by economic balancing, rising interest rates, and inventory changes. To understand what happened in 2022, it’s important to first understand how our current market was the inevitable conclusion to the record-breaking year that preceded it.
2021 Cause & Effect
As industries shut down in response to pandemic safety measures, we experienced widespread supply shortages across nearly every economic sector. These shortages then lead to a significant imbalance between low supply and high demand, which in turn caused a global phenomenon of sharp inflation hikes.
Real Estate was certainly no exception to this trend. 2021 will go down in the history books as one of the most fast-paced seller’s markets ever seen in US history. The benchmark for 2022 was set by historically high home prices, low inventory, and dramatic buyer demand. These conditions were additionally fueled by record-low interest rates designed to help boost a faltering economy during the lockdown. At the height of the pandemic, it became very typical to have 5-10 offers on a home within less than a week on the market. In the first half of 2021, the Go With Ro team saw stunning statistics on our sales with homes selling for an average of nearly $30,000 over asking within a week on the market.
These market conditions meant that sellers could benefit from high purchase prices and fast sales. Buyers willing to battle the stiff competition for listings were able to benefit from extremely low-interest rates and increased purchasing power. However, similar to inflation, the rate of growth was moving at an unsustainable pace. If left unchecked, rapidly growing home prices can create a housing bubble, where housing prices are artificially inflated and are not supported by the underlying value of the homes. By the end of 2021, we were seeing a global rise in inflation across all sectors of the economy and it was essential for the federal government to curb unsustainable growth.
2022 Balancing Conditions
To slow down the real estate market and reduce inflation, the federal government began increasing mortgage rates in January 2022. At the start of the year, the average national 30-year fixed mortgage rate stood at 3.45% and began increasing steadily each month. At first, this actually increased demand on the market as potential buyers raced to purchase a home before the rates continued to climb. Over time, the rising mortgage rates began to have the intended effect and sales began to slow. In our local market, our first indicator of a shifting market came when it became increasingly uncommon for listings to receive multiple buyer offers. By July, local data began reflecting a larger trend of a cooling sellers’ market, with listings remaining on the market for longer periods before selling.
As mortgage rates continued to rise month over month, Buyers became steadily more conservative with their home search. It became critical for sellers to price their homes correctly, market extensively, and stage impeccably in order to attract buyers and receive offers.
Typically, this type of market slowdown would be accompanied by an increase in the number of listings. This year we’ve seen the opposite trend. Rather than an increase in listings driving favor into the hands of buyers, active listings have decreased consistently over the course of the year. This incredibly low inventory has kept us in a seller’s market for all of 2022, and we will likely remain in these conditions into the new year.
Affect on Home Prices & Valuation
When markets shift, the immediate fear for many homeowners is the question of home value. This year, home prices have consistently increased at a healthy rate. In response to the shifting market, the rate of growth has slowed to single digits but continued to rise month to month.
In comparison to the real estate frenzy of 2020 and 2021, a slower market can feel like a drastic, destabilizing shift. We know from experience that it is an extremely necessary and controlled market change designed to protect the long-term affordability of housing and curb inflation. Although high mortgage rates can be an active challenge (or even barrier) for many prospective home buyers, they are actually one of the many tools the federal government is utilizing to maintain overall market health. That, in tandem with far more stringent lender policies, protects us from situations like the 2008 housing bubble.
Go With Ro’s Year In Real Estate
With all the big national trends, our local market has remained active and strong. Our team has celebrated a fantastic year closing over 73 transactions and $54 million in home sales. When the market shifts, we know how to shift with it and we pride ourselves on our innovative marketing and sales strategies that find our clients the ideal buyer in any market.
We are often asked about what the “best” time to enter the market is, to which we universally respond: Don’t try to time the market. Much like the stock market, conditions will always be in flux. The real estate market is notoriously unpredictable, as it is influenced by many variables and economic conditions. Even the best analysts cannot foretell the future of the market and delaying a necessary home sale or move in the hopes of anticipated trends could set you up for failure. We always recommend entering the real estate market when it is best for your personal timeline and housing needs, rather than attempting to predict ideal conditions. Our team will guide you through a successful home sale or purchase that is catered to your goals and primed for your long-term success.
Big Picture Wrap-Up
Overall, 2022 was a year of balancing and controlled slowing. If you are interested in learning more about market conditions or are thinking about buying or selling a home in the coming year, contact Rowena at (360) 909-6399 or Rowena@GoWithRo.com.