Real Estate market Update July 2022
Posted by Thomas Brewer on Friday, July 8th, 2022 at 3:12pm.
I thought I would send out a market update that will encompass a dramatic shift on price appreciation, interest rates, inflation and inventory level re-sell and new home inventories and strategies.
- Prices – I truly believe that you will see prices drop in every market going forward in the next 4 to 6 months. Price drops have already started in some areas as of this publication. The non-demand areas – weaker school systems could very well drop up to 5 percent to 7 percent if interest rates level. The solid school system homes will remain much more stable and depending on the area of the school system should hold and stabilize. Certain homes will depreciate even in the higher demand areas but not significantly. These areas may see a 2 percent to 4 percent decrease however if mortgage rates recover to around 5 percent it will level off.
- Interest Rates – Over the last 2 months interest rates have risen almost 2.25 percentage points. The par rate for a loan in April was 3.75 percent. The rate for a home loan today is 5.875 percent paying a point. Par rates are hard to gauge as Fannie and Freddie are not making these available on a daily basis. However par rates as of the day of this communication were trending in the low 6 percent range. So where are rates going? It’s really hard to say. But the forecasts say rates will most likely stabilize in the mid 5s. After the 1st of the year there might be potential to drop back down to 5 percent or so. The market will not do down into the mid 4 percent range anytime soon if ever if you believe the data points and current trends.
- Inflation – External factors that are affecting housing are just about everything and anything however there are two that three that are prevalent. 1. Gas prices – this affects all of us in our wallet directly. The more you drive the worse it is. Until we get some resolution on this many folks are going to be a bit guarded in buying decisions. 2. Grocery Prices – Just like gas grocery prices are up around 25 percent. Unlike gas it seems as though that might be the new normal going forward. 3. Real Estate Taxes – The good news is that in Texas the maximum increase is 10 percent of the tax amount if the property has a homestead on it. The bad news is that for the foreseeable future real estate taxes are going up. How much will depend on how the market adjusts.
- Re-sell Homes and Inventory Levels – As interest rates have gone up the inventory levels of resell homes have gone up as well. The all-time low levels of housing were at the end of April 2022. Since rates have gone up the inventories in most areas have at a minimum doubled and at a maximum have more than tripled. The trend line of inventory will continue to move upward. The question I am constantly getting asked is when is it going to be a buyer’s market. The short answer is not now. But the market is rapidly shifting to a neutral market and in the next two months I suspect we are going to be there. So, what does that mean? Pool homes will still be the most difficult. Homes with acreage as well. Homes that are newer with solid improvement next. However other than pool homes the market soon will not only not be bidding at all it will also be a market that buyers that couldn’t buy before will have opportunities. Closing costs will start being paid by sellers on certain homes. Sellers will be paying their own title policies as well as offering home warranties again. Price will become negotiable on certain homes. Regardless changes are here and or coming soon.
- New Home Inventories – Builders have had quite a few market changes that are affecting current inventory levels. Build jobs are being cancelled, buyers terminating due to the economy or rate increases and in general changes of heart due to the price of the home. So, what does that all mean? There are no longer lotteries to build. There has been an inventory spike with builders that in some areas has doubled the amount of ready and coming soon inventory. There are now incentives to buy with financing, lowering the prices of certain homes, lowering the interest rates with major inducements and there are also agent incentives as well. New homes are still incredibly expensive compared to a re-sell home but the market has shifted in most areas to buyer incentives.
I hope this information helps to sift through the new markets. Please do not hesitate to contact me with any questions.
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