Heading into to 2022, there was some optimism that the runaway housing market in the United States might come back down to Earth a bit after the unprecedented rise in home prices seen during the first two years of the coronavirus pandemic.
It’s beginning to look like that assessment may have been a bit premature. People shopping for homes this year should likely brace for a tough road ahead in the coming months, when the housing market hits its usual spring rush.
Fortune rounded up some of the key figures that help inform real estate projections, finding little evidence the historic shortage of homes for sale will move significantly in a positive direction for buyers:
To be blunt, the latest reading of housing inventory levels doesn’t look good for would-be homebuyers. As of December, there were just 1 million homes listed for sale on Zillow. That’s down 17.5% from December 2020, and down 37.8% from December 2019, when there were nearly 1.7 million homes for sale. This means the housing market is tighter right now than it was heading into the hyper-competitive 2021 spring housing market.
The housing inventory that currently exists is under heavy demand pressure from Millennials who continue to look for a first home. Many of these young families found themselves priced out of the market during the pandemic, or left with too few options that met their parameters as they searched to take advantage of low interest rates.
As the Fed begins to increase interest rates in response to soaring inflation, the intuitive expectation might be that this will soften the upward trend in home prices that appreciated last year at the highest rate on record. The average 30-year fixed mortgage rate jumped to 3.45% this month, up from 3.1% in December and a scant 2.65% last January.
But the effect of higher interest rates could drive a rush on available homes this spring as buyers look to take advantage of what they feel may be a last opportunity to lock in a favorable interest rate, even at prices higher than they ideally wish to spend. If rates don’t rise quickly, they will still remain enticing enough for many to pursue buying a home under these conditions.
Another important feature of the country’s low housing inventory is that it’s not isolated to a few key markets. In fact, out of 327 housing markets tracked by Zillow, 254 have inventory levels that remain down by more than 30% between December 2019 and December 2021, Fortune reported. In 54 housing markets, inventory is down by more than 50% from pre-pandemic levels.
There was a modest uptick in housing inventory in parts of the country during the summer and fall months last year, but some of the factors that analysts believed might keep this trend going have not had an especially significant impact on the number of homes hitting the market.
Buyers are undoubtedly in a bit of a holding pattern that will test their patience and resolve depending on how determined they are to make a move during the first half of this year. It’s a tricky moment to navigate, particularly with the hindsight of the last two years and the dawning realization that many of pandemic era features of the real estate market aren’t mere flashes in the pan, but rather longer-term reflections of extreme supply and demand curves.
One benefit that some prospective buyers should have is that they may have spent the last two years increasing their savings in order to gain greater flexibility and overcome price constraints this time around. It’s a more comfortable position to hold, but it doesn’t bode well for avoiding more bidding wars and pricing out those who are just beginning to search for homes.
Photo Credit: Thirdman/Pexels.com
50 Comment
Comments are closed.