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Category: Interest Rates (Page 1 of 15)

Housing “Crash” in 2022? Extremely Doubtful.

woman walking toward black sedan parked in front of colorful houses

Home prices have climbed rapidly over the last 3 years. So much so, many in the media worry that a housing market crash might be looming.

Is this really a valid fear?

Will the Housing Market Crash In 2022? Nearly all experts say “no”.

Given the increases in value of homes, there are a few in the news media pontificating that a housing market crash is on the horizon.

Experts and the data, however, suggest otherwise. Here are two key factors…

New “Millennial” Buyers

woman in white crew neck t shirt using silver macbook

The Millennial demographic makes up a major portion of homebuyers.  Most experts believe that next year, they’ll continue to the major players in the national housing market. Many of them will be first time buyers, which will help keep demand for homes robust over the next few years.

Believe it or not, household formations of those ages 27-35 is over double the rate of actual homes being built. There will continue to be a wide gap between the number of homes that need to be built to keep up with demand. This alone is putting pressure on prices which won’t change in the foreseeable future.

Low Inventory

house renovation

Housing inventory has made things tough for homebuyers as of late.  This has been a crucial factor in the rapid rise of home prices over the past year. Although demand among buyers continues to remain strong, existing inventory has not been sufficient to keep up with that demand.

Most industry insiders believe that this situation stay with us in 2022. According to Fannie Mae, a total of 6.8 million new and existing homes are expected to sell by the end of this year. In 2022, about 5.6 million existing homes are expected to be sold, along with 893,000 new home sales.

What Can We Expect in 2022?

According to Zillow, the average price of a home in the US has jumped 19% over the last year. They also predict home prices to increase at a rate of 13.6% over the next 12 months.

As you might remember from your basic economics coursework, the price of anything is based on supply and buyer demand. Over last 2 years, demand among homebuyers has been strong, while housing inventory has been very tight.

Continued Constricted Inventory

While buyer demand remains high, housing inventory is shrinking for the time being. Year-over-year, the number of listed properties decreased 22% compared to 2020. Unfortunately for buyers, seller activity continues to be much slower relative to buyer traffic.

Strong Buyer Demand

Real estate professionals anticipate home buyer demand to remain strong into 2022. In September of 2020, listed homes received an average of 3.4 offers, and by the same month a year later, that number moved up to nearly 4 offers.

These figures suggest that buyer demand has remained fairly strong yet stable, which is expected to be the case moving into 2022.

Mortgage Rates

Low mortgage rates make home buying more affordable.  Even though home prices have risen dramatically over the past year, historically low interest rates have still made it achievable for buyers to get into the market.

Over the past three years, mortgage rates have been on a steady decline, though they’ve recently shown a slight uptrend. In the fall of 2018, the rate for a 30-year fixed-rate mortgage peaked at nearly 5%

Today, the rate for the same mortgage type now sits right around 3.375%. This makes a huge difference in the overall cost of a mortgage and monthly mortgage payment amounts.

According to the Mortgage Bankers Association (MBA), the average 30-year fixed-rate mortgage rate will reach 3.7% by the third quarter of 2022, and could hit 4% by the end of the year.

Find Out More

In 2022, most believe that property values will most likely continue to rise, although at a slower rate. With that said, a crash is highly unlikely.

Would you like to find out more?  Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market.  It would be my pleasure to help you!

2022 Real Estate and Mortgage Rate Forecast – The Lending Coach

In looking at the 2022 real estate and mortgage rate forecast, I’ll analyze what’s driving the real-estate market and what should impact mortgage rates over both the long and short term.

Similarly to 2021, the biggest issue will be finding enough homes for buyers, as housing inventory is still near all-time lows throughout much of the country. With that said, inventory has shown improvement for buyers over the last 3-4 months.

clear and blue bubble near green leaves

At the same time, because of today’s historically low mortgage rates (which are rising), housing affordability is still at a good level, even with the increases in home prices and rates.  This is good news for buyers.

Interest rates are up in 2022…and that’s expected to continue – but it’s important to understand that rates are still historically VERY low.

Real Estate

Inventory

The total supply of available homes for sale will continue to be the biggest issue in 2022.

Per Zillow’s chief economist: “We predict that the current sellers’ market will continue into 2022, driven by the same factors that drove up home values by double-digit percentages in 2021…”

“A tight supply of for-sale homes, plenty of millennial and baby boomer buyers competing for those homes, low mortgage rates, and a shift toward remote work that opens new possibilities for home shoppers.”

Fortunately, there are a few bright spots, as new homes are being built at a faster pace.

“With more housing inventory to hit the market, the intense multiple offers will start to ease,” National Association of Realtors (NAR) economist Lawrence Yun said recently. “Home prices will continue to rise but at a slower pace.”

According to the NAR, new-home sales are forecast to rise to 920,000 in 2022, up from last year, which is expected to have been around 800,000. Existing-home sales are anticipated to dip to 5.9 million, down from last year, which is expected to have been around 6 million.

front of wooden bungalow

Appreciation

Home prices escalated very quickly in 2021. The national median home price hit $362,800 in June, an all-time high, according to the NAR. The Case-Shiller home price index peaked in August when prices rose 19.8 percent year-over-year that month!

Zillow’s forecast calls for an 11% increase in home values in 2022. That’s down from the 19.5% jump projected for 2021, but still among the strongest years since Zillow began tracking home values.

With that said, our forecast for 2022 is continued appreciation, but not as quickly.  Most experts believe that home values will rise between 7% to 11% in 2022. 

Interest Rates

Mortgage rates have risen over .375% during the first 10 days of 2022, due to the market’s concern of increased inflation, government spending, and debt.

This pattern will most likely continue into the first half of 2022. 

Inflation Fears

Mortgage rates are affected by inflation because inflation erodes the buying power of the fixed return that a mortgage holder receives.  Interestingly, the best way to combat inflation is by raising the Fed Funds Rate.  Because inflation is already over 7%, mortgage rates are climbing in response.  

The Federal Reserve and its President, Jerome Powell, stated they are forecasting multiple rate increases this year AND a tapering of their balance sheet in 2022, which they believe will limit inflation and begin to bring it down closer to their 2% target.

Many experts hope these actions will bring DOWN interest rates later in the year, possibly into the low 3% range once again.  This will depend on how effective the Federal Reserve is in fighting this current inflation battle.

Silver Lining for Certain Buyers

Rising rates might not necessarily bad news for some buyers. The “silver lining” of higher mortgage rates is that fewer speculative buyers will be in the market, because there is less money to be made. That could actually help first-time buyers.

“When you have higher interest rates, it becomes more of the people who buy homes just to live in them,” says Skylar Olsen, the principal economist at Tomo. “That’s something the market will benefit from, coming back down to sanity.”

Mortgage Rates in 2022

NAR’s Yun projects that mortgage rates will increase to 3.7 percent in 2022, pushed up by persistently higher inflation.

Economists at the Mortgage Bankers Association predict that the 30-year fixed-rate mortgage will rise to 4 percent in 2022.

“Mortgage lenders and borrowers should expect rising mortgage rates over the next year as stronger economic growth pushes Treasury yields higher,” said Mike Fratantoni, MBA’s chief economist.

marketing businessman person hands

Greg McBride, the chief financial analyst at Bankrate.com, predicts that the 30-year fixed mortgage rate will peak near 3.75% during the year and fall back to 3.5% by the end of the year.

“Long-term rates will move higher in the first half of the year, but by the close of 2022, concerns about slowing economic growth will be unwinding that and bringing them back down,” he said. “This will be higher than where mortgage rates started the year but ending at levels previously unseen before the pandemic began in 2020. The drop-off in refinancing activity will mean lots of competition among lenders thirsting for volume and plenty of lenders with rates much better than the average.”

In Conclusion

2022 looks to be a decent one for both buyers and sellers, although the market would clearly be considered a “seller’s market”, because inventory is quite low.

Also, we can expect mortgage rates to rise through the summer – possibly moving as high as 4%.

Although that’s higher than the lows we’ve seen over the last 2 years, a 4% mortgage rate is historically CRAZY low and something buyers should take advantage of!

To sum up the 2022 real estate and interest rate forecast:

  • Mortgage rates will rise in the beginning of the year and could drop later in the year
  • Housing inventory will continue to remain tight
  • Home prices will continue to move upward, although at a slower rate than 2021
  • Housing will still remain affordable, due to historically low mortgage rates
  • Inflation will be the big “wild-card” factor and could change things

In reality, now is a fantastic time to purchase or refinance and take advantage of market appreciation and low mortgage rates. Contact me for more information, as it would by my privilege to help you.

Is It Too Late to Buy a Home?

high angle shot of suburban neighborhood

2021 was a banner year for housing, fueled by record low interest rates, strong demand, and a low supply of homes. 

woman working at the desk in office

Some buyers may be wondering if they are late to the party, or if it’s still a good time to purchase a home. 

The answer is YES, it’s still a good time to buy…it’s not to late!

Sure, the market is tight, but interest rates are still remarkably low and homeownership has some fantastic perks!

Today’s Market…and Looking Forward

microphotography of orange and blue house miniature on brown snail s back

Experts expect demand to increase over the next several years as more millennials turn of age to buy a home.  At the same time, inventory is expected to remain extremely tight.

Builders are struggling to deliver homes with labor and chip shortages, as well as supply chain disruptions.  Like any market, strong demand and tight supply is very supportive of home prices. 

Additionally, interest rates are still extremely favorable. Yes, they have moved a bit higher from record-low levels (due mainly to inflationary pressures), but are still historically super low.

What’s The Next Step?

If you are considering purchasing a home, conditions are a bit challenging because of low inventory. At the same time, the rewards can be substantial, as the home values are expected to continue increasing!

Contact me to see the opportunity you have in becoming a homeowner, as it would be my pleasure to help you!

Homes Are More Affordable Now Than They Have Been in Years

The media is reporting that there is an affordability crisis and discouraging potential home buyers. Unfortunately, this narrative is completely wrong, as homes are more actually affordable now than they have been in some time.

As we all know, home prices are appreciating. When buyers hear that prices are going up, it’s normal to think a home will cost more as the trend continues.

The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise.

Understanding Home Affordability

Understanding how affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down their optimal window of time to make a purchase.

There are three main factors that go into determining how affordable homes are for buyers:

  • Mortgage Rates
  • Mortgage Payments as a Percentage of Income
  • Home Prices

The National Association of Realtors (NAR), produces a Housing Affordability Index, which takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Why are homes so affordable today?

Although there are three factors that drive the overall equation, the one that’s playing the largest part in today’s home buying affordability is historically low mortgage rates. Based on this primary factor, we can see that it is more affordable to buy a home today than at any time in the last seven years.

If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home.

With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates.

Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, please do contact me so we can determine your next steps in the process.

More Housing Bubble Fears in the Media

clear and blue bubble near green leaves

Home prices have risen over 40% since 2006. This has prompted another round of media fearmongering that a housing bubble is imminent.

As you might have recognized, the media has been talking about a housing bubble for the past several years, only to see home prices continue to be well supported.

Is Today’s Market Like The Bubble of 15 Years Ago?

Comparing today’s housing market to the market in 2006 requires us to understand some key differences to help us see the full picture. Let’s break that down.

The majority of individuals who buy homes do so based upon monthly payment. Therefore, we must consider differences in mortgage interest rates, as well as differences in household income between the market in 2006 and today.

Mortgage rates in 2006 ran about 3% higher than interest rates that are available today. This helps make the monthly payment today much lower, even in some cases where the amount borrowed is higher.

Meanwhile, average hourly earnings have increased by 55% from 2006 to today, according to the Bureau of Labor Statistics.

Homes Are Actually MORE Affordable Today

Because of the rise in income, as well as the drop in interest rates, the cost to purchase a home today appears to be significantly more affordable than it was in 2006.

Additionally, today’s appreciation is due to record low home inventory levels and strong demographic demand, which wasn’t the case in 2006.

Don’t let the media scare you out of all the wonderful benefits of home ownership. Contact me today to find out more!

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