July 15, 2022 - 11:49 am
Despite the housing market challenges, 2022 could be a good year to purchase a home.
Over the past year, buyers have seen interest rates rising approximately 2 percent — the highest since 2009 — with home prices increasing by about 20 percent.
The current record-high home prices tend to disrupt the plans of homeowners who want to upgrade residences. With recent rapid appreciation, the lack of inventory and monthly payments increasing significantly, consumers are alarmed and forestall purchasing or selling their homes. These potential buyers — who would also increase market inventory by becoming sellers — don’t want to compete in the frenzied housing market.
The good news is as interest rates rise, home valuations begin to stabilize. Inventory is also beginning to increase, a development that typically makes it easier to buy a home. In fact, Realtor.com estimates active listings will grow 15 percent this year, and home sales are “expected to hit their second-highest level in 15 years.”
All of the factors indicate the market will shift into a more positive climate for house hunters or become a ‘buyer’s market.’
Homebuyers have been functioning in a strong seller’s market for the past couple of years. We are noticing the days of multiple offers is over. Buyers, once again, can negotiate a better price. Seller-paid closing costs are returning in frequency as part of allowing buyers to offset the higher rates.
There is a natural slowdown when rates move as fast as they have over the past year.
Where does this end?
The Fed’s approach to “shock the system” includes the U.S. Central Bank on June 15 increasing its interest rate by three-quarters of a percentage point, the highest single hike since 1994.
The goal is to cool rising inflation and decelerate the rising price of homes. More rate hikes are anticipated this year as consumer prices continue to rise. Thus, consumers should expect higher interest rates to be the new reality.
Economic trends point to a stabilization of home prices and the beginning of price reductions to combat affordability and declining consumer confidence. At a six-month high, 15 percent of home sellers have undergone a price reduction.
Several indicators across the markets point to a possible recession in 2023. Historically, recessions reset the economy and provide the stability we need.
Therefore, I believe we will start to see a return of normalcy in the market. The next couple of years will be a time for the market to stabilize and compress with a reduction of the abundant amount of cash flowing through our country.
So, what to do now?
I believe there are opportunities in the Vegas housing market.
If you compare your options, the annual percentage rate of renting is 100 percent. Accounting for the fact the cost of waiting to purchase a home equals rent plus market appreciation, on average those who wait five years to buy a home could experience a financial loss equating to six figures. This is calculated by taking the unearned principal combined with the increased cost to buy a home.
Consumers need to work with a mortgage professional who can thoroughly review finances and current mortgage offerings to create a clear plan for purchasing a home. There are a variety of options and approaches that a trained professional can educate a consumer on, which in turn will help to reestablish confidence in this current housing market.
My bottom line
After reviewing the trends and forecasts for the remainder of the year, house hunters should see a revitalization in the housing market soon. Demand will continue to decrease, making way for the inventory to recover and eventually increase. As a result, this fall could be the best time to find a home.
Robert Coomer is the founder of The RobertGroup (RCG), which specializes in residential mortgage lending. With over 20 years of experience, Coomer provides effective mortgage solutions, guidance and assistance to customers from all walks of life. Recently, Coomer partnered with Celebrity Home Loans to strengthen their professional focus and provide a greater range of resources and opportunities.