Like many would-be homebuyers, you probably missed the opportunity to buy a home last year and wish to grab the chance in 2022. While it’s unlikely to witness last year’s jaw-dropping rises in home prices, interest rates, and home prices will continue to increase through 2022 and into 2023.
Home prices will continue to climb throughout the rest of 2022. Matthew Gardner, Windermere’s chief economist, predicts a slower increase than recorded from 2020 into 2021.
Prices will increase the highest on the Eastside, where Kirkland and Bellevue have become tech hubs. The current median home price on the Eastside is approximately $1.515MM, up 32% from last year.
According to the Federal Housing Finance Agency (FHFA), in 2021, the housing market had the sturdiest showing in 15 years. It sent home prices skyrocketing nearly 20% through the third quarter of 2020 to 2021.
According to Fannie Mae’s Home Purchase Sentiment Index, in 2022, just 26% of potential home buyers thought to seize the opportunity. This was a significant drop in sentiment from 2021 when 52% of consumers believed it was the right time to buy a home.
Home prices have skyrocketed because of the all-time drop in housing inventory. As long as the buyer’s market demands more than the seller’s market has to offer in supply, competition will remain fierce, and home prices will continue to rise.
However, rents continue to rise on the Seattle Eastside, making now a good time to buy while interest rates are still historically low, according to Matthew Gardner. He further states that Ukraine/Russia will impact the market, and we may see a slight reduction in mortgage rates. Here are four things you need to understand before buying a home in today’s market.
1. There’s a shocking imbalance of supply and demand
With more potential home buyers than homes on the market, competition to buy a home is fierce. The depleting housing supply fosters intense competition marked by bidding wars and all-cash offers.
The competitive housing market forces prospective buyers into expensive homes that don’t ultimately fit their wants or needs. It’s the perfect opportunity to buy property for those with cash to spare and space for compromise.
2. Even though mortgage rates are still low, home prices are extremely high and are expected to continue rising
Low mortgage rates and the need for a comfortable work-from-home environment have instigated a home-buying frenzy. The rise in real-estate activity has depleted housing inventory and increased housing prices, meaning you could ultimately be overpaying for a home you’d otherwise settle for.
While mortgage rates are low, the rising home prices could eliminate the opportunity to get more value for your money and keep monthly payments affordable.
3. Building a new home is expensive
Homeowners are reluctant to sell their homes out of fear that they may not afford their next one. It causes existing inventory to dwindle, leaving potential home buyers with no option but to consider buying land and building new houses.
However, the raw materials necessary to construct new houses are increasingly expensive amid the pandemic as supply and shipping issues result in long waits for certain supplies. Labor costs are also high as construction workers are in high demand.
4. Popular residential areas have become even more unaffordable.
The pandemic emboldened employees who could work remotely to try out the suburbs, rural areas, or different states. This led to population rises in certain states, including Texas, Florida, and North Carolina. Purchasing a home in these newly favorable residential areas may lead to even more demand, higher prices, and less inventory to choose from.
When you’re ready to talk about your buying/selling goals, let’s chat and help you take advantage of this hot market!