Housing market entering uncharted waters

Posted by Liza Alley on Wednesday, March 30th, 2022 at 11:35am

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Mortgage rates climb even higher

 

Average mortgage rates  are higher for all loan types today with the 30-year mortgage rate crossing above 5%.

  • The latest rate on a 30-year fixed-rate mortgage is 5.17%. ⇑
  • The latest rate on a 15-year fixed-rate mortgage is 4.197%. ⇑
  • The latest rate on a 5/1 ARM is 3.974%. ⇑
  • The latest rate on a 7/1 ARM is 4.135%. ⇑
  • The latest rate on a 10/1 ARM is 4.245%. 

Fed Chair Jerome Powell is done sitting idly on the sidelines as inflation burns away Americans’ purchasing power. The plan? Draw upon the central bank's decades-old inflation playbook by increasing rates until demand pulls back, and price growth slows.

This is already presenting a test for runaway inflation's poster child: the U.S. housing market.

CoreLogic, a real estate research company, which predicts the housing market is about to undergo some serious cooling. Between January 2022 and January 2023, CoreLogic expects U.S. home prices to rise just 3.5%. If CoreLogic is right, it would mean 2022 will go down as a below-average year for home price growth.

Why is CoreLogic's model relatively bearish? Unlike Zillow, it predicts a greater pullback on the demand side. The sting of soaring home price growth during the pandemic was lessened, to a degree, by record low mortgage rates. Now that rates are returning to pre-pandemic levels, buyers will feel the full punch of record prices. That could finally create some pushback on the part of home shoppers.

In Western Washington homebuyers should try to keep recent interest rate hikes in perspective. Locally, job growth will be crucial to maintaining a robust housing market, something he expects to continue.

 Are out of town home buyers defeating the local buyers?

Mortgage rates continue to rise!!

 

While home mortgage interest rates have increased to the high 4% range, this would be considered fantastic on a historical basis, but it is an adjustment from the recent low rates that we are absorbing. With this change, the main focus for the future strength of housing will be job growth, which is the No. 1 indicator to a strong housing market. The Central Puget Sound region is currently seeing extremely strong job growth, which is likely to continue in the years ahead.

Here are a few predictions for what lies ahead.

Price appreciation will slow: The local market has seen tremendous price appreciation in the last two years. We anticipate that price appreciation will moderate slightly this year. After the big price boost in the spring, premium pricing may lower this summer. However, the year 2022 will end with positive price appreciation overall.

Luxury market stability: The luxury market has taken off over the last two years and will continue to be a strong segment of the local market due to solid job growth, the wealth effect and historically low interest rates. 

Inflation will have an effect: It’s also important to keep an eye on rising energy costs as well as supply chain and staffing issues, all of which could affect the housing industry this year.

Buyers’ debt to income ratios will be adjusted down: It’s common today for buyers to have debt to income ratios around 44% approved by lenders. With increasing prices on everything from milk to gas, to staple grocery items lenders will want to safeguard their investments and may lower this threshold to 40-42% (And that adjustment can mean a lot to your buyers)

Fewer bidding wars: As buyers are dealing with the combination on increasing rates, inflation and general uncertainty many are going to be more cautious about overpaying or perceiving that they are overpaying for a home.

Inventory and days on market will increase: “Inventory and mortgage rates will determine how far and how fast home prices will rise this year and beyond,” said Zillow senior economist Jeff Tucker. “We are seeing new listings returning to the market, slowly, as we enter the hottest selling season of the year, but this supply deficit is going to take a long time to fill.”

Inflation considerations: Inflation has already begun eroding the bottom lines of American households, with the Bureau of Labor Statistics noting rising costs for energy, housing and food as prime factors driving it to a four-decade high.

Of the six categories considered, survey participants expect energy prices to increase the most over the course of 2022, followed by house prices, residential rents, and food costs. Employee wages and stock prices were ranked fifth and sixth, respectively, rounding out the list.

 

 Q2 Update: Changing real estate market and outlook for buyers and sellers

 

Mortage rates - 30-year mortgage hit 3.64% in early February 2022

 What to consider when pricing your home to sell

Home renovations that are not benefiting your home value

In a market that is starting to change, it is imperative that home sellers price their home strategically. Markets change fast, so it’s best to find comparable sales within the past three months. If you go back too far, you will see homes where a deal might have been made many months before it closed.

Real estate markets can turn on a dime, so a deal put together more than six months ago isn’t applicable. Pending sales are can be an indicator of the current market’s conditions. However, sold properties are more accurate numbers when determining what price to list your home at (including the condition of your property)

Use your real estate agent as a resource. The earlier you bring a local real estate agent into the fold, the better. A good real estate agent will tour properties regularly, and know their market inside and out. They can likely explain the seemingly inexplicable, and offer tips to help make your home more valuable.

A good real estate agent has the inside knowledge on pending homes sales and their finger on the pulse of the market 24/7.

You Don’t Know What You Don’t Know When Selling Your Home. Selling Your Home in Todays Real Estate Market 

Monroe, an ongoing growing community

With the market starting to show some change, the cities are still highly competitive. So, thinking of selling in today's real estate market? Wondering where you should go next? Consider Monroe. In a real estate market like this, it may be wiser to consider moving further out of the city. The market maybe starting to slow down, but it may still be a nightmare trying to buy in most of the bigger cities in Washington. Further, it is less competitive in the suburbs, with fewer buyers competing than in the cities. More home buyers most certainly drive up the house prices, tag on high-interest rates, and you may likely not be able to afford the house you want any longer. So why stay in the city? The silver lining during the pandemic has allowed many people to work at home, which in return has allowed more people to move to the suburbs. We see signs from many tech companies allowing remote work (at least in part), which will be here to stay.  By not having to drive into the city as often, residents have more freedom to buy more house, more land and enjoy the space that municipalities farther out in the county offer. There is no better time than now to consider moving further out! Some of the benefits of suburban living vs. crowded cityscapes: open spaces, parks, trails, larger homes on larger lots, and general population sparsity.  Consider Monroe, where its small city, big town feel has attracted more people and continuously grows each year.  

If you have any questions, please don’t hesitate to call or text me at 206 819 5137. I’d love to answer your questions about current matters in the real estate market. And/or subscribe HERE to my blog to stay posted on the current market conditions 

 

 

 

 

 

 

 

 

 

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