Guest Post by: Joaquin Miranda with Homelight
If you are thinking of buying or selling a home soon, then the state of the market is a topic that might be on your mind. During the last two years across the nation, real estate agents have been talking about a lack of inventory, and what’s called a sellers’ market. Without enough homes to keep up with demand, that means buyers are left to compete for the home of their dreams while sellers receive top dollar. As we head into spring 2022, the lack of inventory is starting to shift and there are some real estate trends to watch for both buyers and sellers that will come into play for inventory moving forward.
Limited new construction is contributing to listing lag
Before the Covid-19 pandemic hit, new construction was a major contributor to housing inventory. However, as the construction workforce across much of the country was on hold during the pandemic, meanwhile supplies hit a backlog, new home construction was delayed for many projects. Construction is picking up, experts predict that the cost of materials will continue to drop, while the supply chain will improve. However, with renovations also on the rise, there will still likely be a shortage of supplies and construction labor.
Interest rates are rising
Mortgage rates were low before Covid-19 hit the U.S.: 30-year fixed mortgage rates averaged 3.47% in February 2020, compared with 4.37% in February 2019. In March 2020, the Federal Reserve dropped interest rates to nearly zero. This caused mortgage rates to hit a low of 3.2% and that made more people ready to make their home buying dreams a reality, which also contributed to increased housing demand. However, rates are rising and that can impact demand and inventory. Freddie Mac reported the 30-year fixed rate at 3.35% in January 2022, and it’s now hovering around the 3.85% to 3.92% range. The answer to how high rates will go has conflicting answers. Most experts agree that rates will continue to increase, but how much is to be determined. Some industry experts predict mortgage rates will go as high as 4.25% by the end of 2022.
Inventory will continue to shift
Experts predict that a combination of increased home prices and mortgage rates will create more of what agents call an “affordability ceiling,” creating an inventory shift. Other real estate inventory shifts will happen as a result of trends in remote work and people moving from first to second-tier cities or from urban areas to suburbs. The end of forbearance and Covid-19 emergency protection for struggling mortgage holders could put more homes in foreclosure which would then be added to the housing inventory.
Homebuyers and sellers would be wise to watch the market and consult with a real estate agent to see how inventory shifts will impact individual markets. By watching the market, you can find the optimum time to move forward with your real estate goals.
