Red Hot Real Estate: Spring Market Update

Red Hot Real Estate: Spring Market Update

Everyone knows that spring is typically the time of year when the real estate market is HOT! We’re talking en fuego people! This year is no different; however, because of COVID, inflation, low supply/high demand, there are numerous fears surrounding buying and selling right now. Well, read on, and hopefully your fears will be assuaged as the market might be hot, but it is definitely healthy right now, too. 

Let’s review a few key factors!

Increasing mortgage rates

Yes, it is true. Mortgage rates have steadily been on the rise throughout 2022. January started at an average of 3.11%, and those numbers stood at 4.67% at the beginning of this month (so, bet on them being slightly higher right now).

The 4.67% average (Freddie Mac) is still “historically low” all things considered. Because of this, you might see a slight spike in home sales because people, understandably so, want to buy before they increase even more. This spike, however, is expected to plateau, according to all of the economists and experts in the field: 

“History suggests that when rates rise, there is an initial bump in home prices as many move quickly to buy a home before rates increase further. But after that period, home prices slowed. Freddie Mac analysis shows that a 1% increase in mortgage rates results in home price appreciation that is 4 percentage points lower. For instance, a 1% increase in mortgage rates would change home price growth from 11% to 7% (Freddie Mac).”

That being said, if you are in good standing with your bank (credit score is healthy, etc.), then you may want to refinance now or obtain a mortgage now as the rates are expected to rise through 2023. 

Supply and demand

Low inventory and high demand continues to be the underlying theme when it comes to the real estate market. 

The supply crisis remains and likely will not be fixed any time soon. Current homeowners have locked in fixed-rate loans, and if they do choose to move, they’re likely going to rent out their homes and add additional income or simply renovate or expand their homes if they stay. It makes sense for them and no one can blame them for taking advantage of the situation; however, this does leave entry-level and first-time home buyers feeling the effects of this “supply crunch” the most.

While inventory is still historically lower than average, there is a silver-lining. For the first time in six months, active listing counts went UP in March! That’s a good, comforting trend for buyers out there. 

In February, there were 376,000 active listings and that number increased to 382,000 in March. In addition, there are more new listings each month than active listings. For example, while there were 382,000 active listings in March, the month saw 434,000 new listings, which is the direction and trend market experts like to see. 

In addition, you won’t see many foreclosures any time soon or a jump in those percentages as we are currently near an “all-time low” for delinquency rates on mortgages. Unemployment is at about 3.6% with wages rising and we’re trending towards an all-time high with the number of job openings in the U.S. as well. 

New builds and construction

Despite what might be getting attention in the news today, the lack of new builds and construction has been a trend since the 1980s. Whether this is due to the “soft costs” up front obtaining permits and the “hard costs” of labor and materials, new single-family homes just aren’t being built at the rate they once were. Since the 1980s, however, multi-family apartments have been constructed to fill this gap, but you should plan on still waiting a while for any new builds to be completed. 

Current events have indeed impacted the supply chain and materials have become more expensive over the last few years with the pandemic, supply chain issues, and some lack of labor, but it isn’t doomsday and it’s not time to hit the panic button. 

Again, to reiterate, this isn’t a new trend. In the late 1970s, new construction accounted for nearly 500,000 entry-level homes a year, and now that number is about 50,000 entry-level homes being built each year with a “tremendous demand” for them and not a lot of incentive profit-wise for builders to simply be blunt. Just be patient and/or willing to foot a higher bill should it be your prerogative to build right now. 

Home appreciation and value

Some more good news for homeowners comes in the form of home appreciation. Over the next five years, prognosticators are estimating almost $100k in growth for mid- $300k homes. For example, if you purchased a $360k home in January of 2022, you’re looking at an estimate of $96,342 in potential growth in household wealth by 2027. 

Rental rates are also on the rise, so if you’re interested in a home right now and able to buy, our realtors would strongly suggest you do so if you find something you love. Then you’ll also be able to capitalize on the expected increase in appreciation value as well. 

The bottom line

If you want to buy, be prepared to act fast. Nearly 31% of all homes being listed are accepting offers within five days. Now, more than ever, it’s important to have an agent on your side with TIME for you, so that you can move quickly, yet comfortably, with your decisions. If you’re looking to buy, or sell, in this market, speak with one of our agents today so that we can assist you in making the best financial and personal decisions for you and your family.