Decoding the Surprising 2022 U.S. Housing Market--and Making It Work for You
To say that the 2022 U.S. housing market has been volatile is like saying that Arizona gets a bit warm in the summer. This year has smashed the experts’ expectations, set records that stood for more than 2 decades, and changed the way lots of people think about the wisdom of buying or selling a home. Read on to discover:
How the U.S. housing market surprised us all.
How the Greater Greenville, SC housing market has fared.
What these local and national housing market trends mean for you.
The 2022 American housing market has surprised everyone
At the end of 2021, virtually everyone who made predictions about the housing market for 2022 said change was coming. However, the extent of the change caught them all by surprise.
First, there's the matter of interest rates
As we entered the year, the pundits predicted rising interest rates--but no one expected that interest rates would soar beyond the estimated level of 5-6% by year's end to the current level of well above 7%--with 2 more months still left in 2022. For a bit of perspective: the US housing market hasn't seen 7% mortgage rates since 2002! Today's rates are the highest they've been in 20 years.
Then, there’s the housing shortage
The housing shortage isn’t new. It’s been here–to some extent–for the last decade. But this year, many thought it would decrease. However, in June of this year, NAR (National Association of Realtors®) estimated that the U.S. housing market was short by 5.5 million homes. Add to that number an additional 1.3 million homes that are lost to the market or underproduced due to supply issues or other difficulties, and the deficit jumps to 6.8 million.
The NAR report also highlighted the “chronic shortage of affordable and available homes.” This is particularly worrisome for people with limited funds looking to purchase a modest home. In some really hot markets, those homes truly are nearly as scarce as the proverbial hen’s teeth.
And don’t forget soaring inflation
In 2020, according to the Consumer Price Index (CPI) the average annual inflation rate was 1.2%. By 2021, average inflation had jumped to 4.7% annually. We can only guess at the average inflation rate for 2022, but it’s sure to top the 2021 rate; the rate for September alone was 8.2%
Unfortunately for home buyers–and consumers in general–inflation rates like this greatly reduce purchasing power. Right now, every $1 you spend buys as much as 87 cents bought in 2020.
That trifecta has rocked both buyers and sellers
Some buyers are knocked out of the market. They can’t increase their income or reduce expenses enough to qualify. Some buyers who could still purchase are concerned enough about the economy that they are skittish about buying. They fear further chaos in the housing market or wonder about job security and their ability to make their mortgage payments
Sellers are seeing a shift in the housing market that, until a few months ago, strongly favored sellers. Homes sold quickly and often for more than the asking price, especially in desired subdivisions or school districts. Many homes sold AS IS. Some seller’s didn’t bother with negotiating repair addendums or lining up contractors.
That’s still the case in some locations and at some price points, but the market is shifting. Sellers, especially if their homes are in the upper price ranges, are seeing their homes sit on the market. Bidding wars are less common; repair addendums are making a comeback.
Here’s what makes things really tricky
Nothing I just said about the national market may fit your local housing market exactly. The national figures don’t apply evenly. They vary among states, and among counties and cities in the same state. For example, my husband and I are Realtors® serving greater Greenville, SC. Greenville has a stable economy and a moderate climate. The housing market is strong. Here are some key market stats from the end of September for our market, our state of South Carolina, and the United States. Notice the differences.
Median Home Price
Average Days on Market
Months' Supply of Inventory
SOURCES: GGAR (Greater Greenville Association of Realtors®, NAR, Norad Real Estate)
Here are some additional enlightening stats from GGAR, given the trends in the national market:
In September, sales volume decreased by 11.2%, and sellers received an average of 98.8% of their asking price, compared to 100.4% a year ago.
The Housing Affordability Index is a measure of the ability of the average wage earner in a location to be able to afford the average-priced home. September’s Index continued a steep decline. The current score of 75 for Greater Greenville means that the average wage earner in our market earns only 75% of what he or she would need to earn to be able to purchase an average-priced home. A shrinking Housing Affordability Index means that increasing numbers of people can’t afford to purchase a home.
What are the ramifications for you?
Times of rapid change make navigating any situation tricky. Navigating
the home market is no exception.
As a prospective homebuyer, you need to:
Prepare well before you actually start looking for a home. You should understand lending requirements, credit scores, the pre-approval process, and procedures regarding earnest money.
Know how much home you can afford to purchase. There’s no sense in looking at homes you won’t be able to purchase. Doing so is discouraging and wastes time.
Make a list of what you would like in a home–-then identify 2 or 3 non-negotiables. Very few buyers find the “perfect home.” Determine what you must have. Look for homes with those features. Additional features are a bonus that you can weigh.
Be ready to act. If your local market still favors sellers, you’ll probably miss the opportunity to purchase if you can’t see the home and place your offer in no more than a few days–maybe as little as a few hours. Even if your housing market has begun the shift to favor buyers, you want to be prepared. Remember, there’s a national housing shortage. That means there’s a limited number of homes for sale; only a small percentage of those will suit your needs. When you find one, you need to be ready.
As a prospective home seller you need to:
Prepare your home to be attractive to buyers. This doesn’t mean that you have to completely update your home and make every little repair before you list. It does mean, however, that you understand who your likely target buyers will be based on the condition of your home. For instance, some buyers are willing to spend more for a home that’s completely move-in ready. That means it’s repaired, updated with fresh paint and/or flooring, etc.
Others would rather paint their home in colors they prefer or wait to replace flooring if it means they don’t have to spend quite as much for their home. Still others see real value in being able to add “sweat equity” to their home right away. They're looking for discounted homes being sold AS IS.
Regardless of the buyer you’re targeting, you’ll benefit from having the home clean and fresh-smelling. There’s something inherently appealing about a home that looks clean and smells good. Conversely, dirty homes that smell nasty tend to repel buyers. If you’ve moved already, you might benefit from having the home staged; staging adds an expense, but may be well worth it.
Price your home wisely. More and more buyers are savvy when it comes to checking websites like Zillow, Trulia, Redfin, or Realtor.com to find homes for sale. They know how to research houses that have sold recently in the area where they would like to live. Often, they’ve viewed other homes, too. So, homes that are greatly overpriced will sit, even in a hot market.
Once a home sits on the market, buyers suspect that the home is defective in some way. They wonder what’s keeping this home from selling. And, they expect that the homeowner will lower the selling price. The reality is that if you overprice your home, you’re likely to:
Get fewer viewings of your home.
Receive low-ball offers.
Help sell the other homes that are listed nearby.
Realize less from the sale since buyers expect a bargain price.
Let a professional do your HOMEwork
The changing and volatile nature of today’s housing market makes it difficult to keep up with how to:
Get the highest selling price when you list your home.
Get the most house for your money when you purchase a home.
A professional Realtor® can guide you through the process, eliminate the hassle of unanswered questions or confusing paperwork, and help you make decisions that benefit you.
At Walker’s Riverside Properties, “We Do Your HOMEwork.” At each stage of the process we provide details–about the market, the neighborhood that interests you, or the homes you view–that inform you and strengthen your decision-making. For personalized, professional, caring service, please contact us at firstname.lastname@example.org or email@example.com.