As economists scramble to update their 2022 housing forecasts issued back in December and update midyear forecasts to factor in the curveballs the market has been pitched, we have been diligently paying attention to the changes and analyzing what is to come. It’s no secret that rates are soaring, and disruptions are ensuing. The market shift is here, and we want to talk about it.
With the national inflation unexpectedly accelerated and running rampant at 8.6%, the highest seen since December of 1981, comes a hike in interest rates in an attempt to get inflation under control. Compounding with a desperate need for inventory in the Real Estate Market to restore balance and sanity, more and more buyers are finding themselves pushed out of the sphere of opportunity to purchase a home.
With an increase of interest rates, on top of the barely-there inventory, buyers have no other option but to fork over more cash to even have a competitive foothold in the purchasing arena. Simply put, non-cash buyers who could afford to shop and purchase a year ago are expected to pay more and get less through tough trade-offs when you consider their need to take out a loan and face the rising rates. Homeownership has become increasingly expensive.
Additionally, Home sellers will need to adjust their expectations considering the above. The bidding wars will look a little different, offers may not be tens of thousands of dollars over asking prices, and buyers may not be as willing to waive all contingencies. Though still deemed a sellers’ market, the buyers’ struggle with affordability and interest rates will undoubtedly shift the tide.
As we continue to track trends in the market and look towards possible solutions, one thing is for certain – you can take heed knowing that we are a long way from a crash. If it were not for last year’s record-breaking numbers, this year would trend on being a very good year. Look to the bright side, if sales do fall that could give inventory levels the boost it needs for buyers to find properties and have options.