The summer of 2022 real estate market is starting to slowly shift. Inflation is higher than it's been for decades. Gas, food and utility bill prices are skyrocketing and mortgage interest rates have almost doubled since their historical lows the last couple years. Many home sellers that have been holding out are now listing their homes for sale in order to catch the still hot seller's real estate market.
Conversely, the changes are forcing some buyers out of the market. The inventory of homes available for sale is starting to balance. Thus, the supply and demand for homes will balance out as well. This will begin shifting the market into a more balanced real estate market.
According to the website usinflationcalculator.com, "The annual inflation rate for the United States is 8.6% for the 12 months ended May 2022, the largest annual increase since December 1981 and after rising 8.3% previously, according to U.S. Labor Department data published June 10." Gas prices are well over five dollars per gallon in many parts of the country. Utility bills are higher as well. Groceries are more expensive, and some people are having a hard time feeding their families. Unfortunately, inflation is taking many first-time homebuyers out of the market. The money they were saving for a down payment on a home is now being used to buy groceries, gas and pay utility bills.
Mortgage Interest Rates
Interest rates have almost doubled since their historical lows the past couple of years. According to a June 16th article on freddiemac.com, "Mortgage rates surged as the 30-year fixed-rate mortgage moved up more than half a percentage point, making the largest one-week increase in our survey since 1987." In that same article, Freddie Mac reported the interest rate for a 30-year fixed-rate mortgage to be 5.78%. Many real estate investors who take out mortgages to purchase investment properties are bowing out of the market. Money is just not as cheap to borrow as it used to be. Some first-time homebuyers, especially the millennials, are being forced out of the market because of the high mortgage interest rates. The monthly payments on homes they used to be able to afford with lower interest rates, are now not affordable.
Many home sellers have been holding out listing their homes for sale in order to maximize their home values. This is because home prices keep rising. The inventory of homes available for sale has been quite low. With the prediction of a market shift, sellers are now coming out of the cracks and listing their homes, so they don’t miss out. Having more homes for sale on the market is helping balance the inventory of available homes for sale. This will mean that home values will not continue to rise so sharply. Real estate professionals are not predicting a bubble burst, however. According to an article written by Natalie Campisi on forbes.com, Housing Market Predictions 2022: Will Prices Drop in the Third Quarter?, "Fannie Mae predicts prices will move up in 2022 by 10.8%, but they also forecast a significant cooldown in 2023, with prices climbing just 3.2%." The market may start cooling off this summer in anticipation of this prediction.
If you are in the market to buy or sell a home right now, don’t let the predictions of a shift stop you. With so many variables affecting the real estate market, it will take time for the shift to occur and for the market to balance out.