Is there a market shift in May 2022? Many economists are forecasting a real estate market that’s cooling off. Some indicators, when taken together, might point to the validity of the prediction. Knowing what may happen can help you better prepare yourself and your clients.
The Facts
Existing and pending home sales have dropped – NAR
Monthly mortgage payments have risen by 28% from a year ago – Home Buying Institute
73% of respondents said now is not a good time to buy – Fannie Mae
Affordability is the lowest in 15 years – Black Knight
Interest rates are expected to rise again in 2022 – Reuters
73% think the economy is going in the wrong direction – Fannie Mae
Yes, inventory is still at record lows, keeping those with enough money purchasing. Many would-be home buyers won’t be in such a situation. And the “lock-in” effect will hit existing homeowners who have a greater disincentive to move and replace their current mortgage that likely has a lower fixed rate.
Quotable Quotes
“There will be an inevitable slowdown in home sales. Keep an eye on DOM and a decrease in multiple offers. Home sellers should not expect big easy profit gains.”
Lawrence Yun, Chief Economist with the National Association of REALTORS
“If consumer pessimism toward homebuying conditions continues and the recent mortgage rate increases are sustained, then we expect to see an even greater cooling of the housing market than previously forecast.”
Mark Palim, Deputy Chief Economist, Fannie Mae
Big Takeaway
Get get off the fence now before rates go higher and equity starts to erode. The market presents the signs and let us know what it means to our own specific situations. In most cases, homeowners have an ample equitable position in their homes which could overcome any stress caused by interest rates hikes with another purchase. In some cases, sellers may want to move out of the city into the cheaper suburbs, or out of the suburbs to the exurbs to help lower their housing costs.