If you’re in the market for a home, take note: The 2nd quarter of 2022 may be the opening you’ve been looking for.
- February’s improving inventory and a slowing pace of price increases may ease some of the competitive pressures.
- Buyers in King County are jumping for joy over the nearly 40% increase in new listings.
- King County also saw a 31% increase in pending home sales month-over-month, as well.
Multiple offer situations are the norm for today’s home buyers, but some brokers with Northwest Multiple Listing Service suggest February’s improving inventory and a slowing pace of price increases may ease some of the competitive pressures.
Commenting on the latest statistical report from Northwest MLS, representatives of the service expressed optimism for the housing market as pandemic-related restrictions ease, but also uncertainty due to the global economic crisis around Russia’s invasion of Ukraine.
“In February, we saw an increase in listings, which could be an indicator that more sellers are primed and ready to go. Inflation, rising interest rates, and new financing options are bringing more sellers into the market,” said John Deely, executive vice president of operations for Coldwell Banker Bain.
Aspiring home buyers may have watched as mortgage rates in recent months rose (though to be fair they are still near historic lows), as did home prices. And it all begs the question: What will happen to the housing market in the remainder of 2022? We dug into the latest predictions and asked pros to share their thoughts.
Shannon Woodcock with The Cascade Team sent this message just the past Friday, March 18th: “Boy I think this market is changing… I’m doing due diligence on several upcoming listings and I’m talking to listing brokers that are getting one offer on the review dates, no offers on the review dates, offers below list. I would expect this is happening other places too??”
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Prediction 1: Mortgage interest rates will rise
We’ve already seen rates rise in the early months of 2022, and some pros say that will continue. The Mortgage Bankers Association predicts that rates on average 30–year fixed rate mortgages will hit 4.5% by the end of 2022, which is up from their 4.3% projection a month prior, according to The Mortgage Reports. “Mortgage rates will have their ups and downs in 2022 and I wouldn’t be surprised if they end the year at 4.5% or higher,” says Holden Lewis, home and mortgage expert at Nerdwallet. And Dr. Lawrence Yun, chief economist at the National Association of Realtors, expects rates to hover around 4% for most of the year.
Prediction 2: Expect less intense competition
If you’re in the market for a home, take note: Some experts believe the combination of inflation worries, world uncertainty, increasing interest rates, and increasing inventory may mean less competition. Indeed, Yun predicts less intense competition in the housing market in 2022. And Lewis says: “The combination of rising interest rates and rising house prices will push some would-be buyers out of the market, which may result in reduced competition after the summer buying season is over.”
Prediction 3: Sellers will see fewer bidding wars and more modest price increases.
I have personally spoken to a ton of agents both that work for the Cascade Team and at other companies… We’re all seeing the same thing…. Be it the increasing prices, interest rates, inflation, or a combination of all. Home sales and multiple offers have slowed just a bit.
It doesn’t mean the sky is falling or prices… It’s more like the market and buyers are just collectively catching their breath.
Overall inventory is still critically low, unemployment in this area especially for higher paying Tech jobs is virtually nonexistent, and historically rates are still low.
Everything points to things continuing to move. Prices are NOT going to fall. In fact, they will continue to increase, just at a more normal rate of 8 to 10% per year. (Read that as less than 1% per month and NOT homes shooting up by hundreds of thousands more than the one that sold only a month before). It’s just a little patience now on the seller’s part and realizing that it may in fact take two or three weeks to sell your home and not two or three days. Which I know can be hard when it seemed like everything was selling in just a day or 2…. Normal markets are more like 30 to 45 days, and I don’t think we’ll be anywhere near that.
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Prediction 4: Home price appreciation will slow
But just how much it will slow is up for debate (and to be fair, most pros expect a rise). Recently released research from Zillow shows that annual home value growth is expected to accelerate through spring, peaking at 21.6% in May. Fannie Mae says home prices will climb 11.2% throughout this year, followed by a more modest increase in 2023. But The National Association of Realtors, which surveyed more than 20 top economic and housing experts, predicts housing prices are expected to climb 5.7% through the end of 2022 meaning that the majority of price gains have already happened, and the rest of the year will be about ½ a percent per month increase.
Bill Dallas, president of Finance of America Mortgage, says he believes we’ll continue to see the greatest levels of home price appreciation in rural and suburban markets where individuals can benefit from a stronger, resurgent economy. “Given some economic headwinds we see on the horizon, I believe home price appreciation will normalize in 2022 and home price growth will begin to more closely track inflation,” says Dallas.
Another thing to consider: Higher interest rates will force buyers to shop at lower price ranges so they can afford monthly payments. “Affordability problems will slow home price growth to less than 10% this year,” says Lewis. “With the Fed using its policy levers to push mortgage rates higher, look for home prices to increase more slowly as buyers are forced to shop at lower price ranges,” says Lewis.
One example comes from Hailey Miller of The Cascade Team. She recently had a buyer out looking for a home in $1,100,000 price range. After several (17 offers written for this client) Hailey managed to get them signed around on a home. Between March 1st when they last missed out on a home and March 15th when Hailey got them under contract their monthly payment on the loan increased by approximately $450 per month because of rising interest rates. That’s $450 per month for the life of the loan with rates unlikely to ever return to the 3’s again and greatly affects affordability and the ability of buyers to escalate prices on home offers.
Prediction 5: Pricier homes will be easier to get
According to data from the NWMLS, homes priced at $800,000 and below are disappearing fast, while supply at higher prices has risen. There are more listings at the upper end, homes priced above $1,500,000, compared to a year ago, which should lead to less hurried decisions by some buyers.
Commenting on rising prices and low inventory, broker Dean Rebhuhn, owner of Village Homes and Properties, said, “I’ve been asked many times if the housing market is going to have a correction.” He believes it will not, citing five factors:
- High job growth and high pay.
- Remote hybrid work models.
- Consumer willingness to drive to locations along I-90, I-5, I-405.
- Investor interest in residential rentals, plus political pushback on short-term rentals.
- Increasing demand for second homes located in high amenity communities within driving distance of Puget Sound, and particularly the Eastside.
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