The housing market is at a turning point, and if your new clients are thinking of buying or selling a home, that may leave them wondering: Is it still a good time to buy a home? Should I make a move this year?
To help them answer those questions, let’s turn to the experts for projections on what the second half of the year holds for residential real estate.
Mortgage Rates Depend on Inflation
While one of the big questions on all buyers’ minds is where mortgage rates will go in the months ahead, no one has a crystal ball to know exactly what’ll happen in the future. What housing market experts know for sure is that the record-low mortgage rates during the pandemic were an outlier, not the norm.
This year, rates have climbed over 2% due to the Federal Reserve’s response to rising inflation. If inflation continues to rise, it’s likely that mortgage rates will respond. Greg McBride, Chief Financial Analyst at Bankrate, explains it well:
“Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be.”
As an agent who has worked through the past two years, you’ve seen huge variation in rates and how it affects clients. Specifically, when rates rise, they impact affordability and purchasing power. Connecting your highly motivated clients with a quality loan officer is another great way to keep their expectations realistic.
Home Supply Projected To Further Increase
This year, particularly this spring, the number of homes for sale has grown. That’s partly due to more homeowners listing their properties, but also because higher mortgage rates have helped ease the intensity of buyer demand. Moderating buyer demand slows down the pace of home sales, which in turn helps inventory rise.
Experts say that growth will continue. Recently, realtor.com updated their 2022 inventory forecast. In the latest release, they increased their projections for inventory gains dramatically, going from a 0.3% increase at the beginning of the year to a 15.0% jump by the end of 2022 (see graph below):
More homes to choose from is great news if your clients have been craving more options or price ranges. Despite this growth, housing supply is still relatively low, so this does not mean there will be a surplus of available homes in the immediate future. It will still most likely be difficult to find a home and move an offer forward, but it should not be as difficult as it has been over the past two years.
Home Price Forecasts Call for Ongoing Appreciation
Due to the imbalance between the number of homes for sale and the number of buyers looking to make a purchase, the pandemic led to record-breaking increases in home prices. According to CoreLogic, homes appreciated by 15% in 2021, and they’ve continued to rise this year.
Even though housing supply is increasing today, there are still more buyers than there are homes for sale, and that’s maintaining the upward pressure on home prices. That’s why experts are not calling for prices to decline, rather they’re forecasting they’ll continue to climb, just at a more moderate pace this year. On average, homes are projected to appreciate by about 8.5% in 2022 (see graph below):
Selma Hepp, Deputy Chief Economist at CoreLogic, explains why the housing market will see deceleration, but not depreciation, in prices:
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
For current homeowners looking to sell, their home’s value is not projected to fall, but waiting to make a purchase does mean their next home could cost more as home prices continue to appreciate. Once that home is purchased, this price appreciation will help grow the value of their investment.
Connect with your clients now to discuss their goals and what lies ahead, determining the best plan for a purchase and move while the market is shifting!