An article is recently read in East Bay Real Estate about the housing market and the shift to having housemates. As we read this article, it got us talking about trends in real estate and where the market is headed:
Over the past year, jaws dropped not just with East Bay Real Estate but across the country as home prices ballooned. But the housing market now just looks like it was ahead of the curve. The latest Consumer Price Index showed a stunning 5.4% rise in prices across the board in the U.S., which is the fastest pace for thirty years.
Meanwhile, the market that was alleged to have gone completely haywire has started to even out. The Case-Shiller Index shows that home prices posted their smallest monthly gains since July 2020. YoY growth has leveled off, and appreciation dipped even in hot markets like L.A. and the East Bay Real Estate Area.
The period of runaway gains appears to be giving way to a much healthier market; home sales increased by a brisk 7% in September across the country not just in East Bay Real Estate. And the 2022 forecast is good. Fannie Mae expects home prices to rise by 7.9% in 2022. That’s strong growth, without the volatility of the pandemic-era market — or the rapid inflation afflicting the economy at large.
Source: Fortune and Mercury News
Current Analysis
So, let’s weigh up on this. There is rising concern about the real estate market and the rising inflation. Here’s what we see thus far in 2022 and what we see going forward:
Both the Consumer Price Index and the inflation rate for the United States increased in 2022. In 2022, the inflation rate is currently 9.1%, up from 4.7% in 2021.
The CPI has increased as well. Here are the most recent numbers for 2022:
| Month | Consumer Price Index (CPI) | Monthly inflation Rate (%) | Yearly Inflation Rate (%) | |||
| 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | |
| January | 261.582 | 281.149 | .3 | .6 | 1.4 | 7.9 |
| February | 263.104 | 283.716 | .4 | .8 | 1.7 | 7.9 |
| March | 264.877 | 287.504 | .6 | 1.2 | 2.6 | 8.5 |
Here are a few other trends we’ve noticed so far in 2022:
- Existing home sales decreased 5.4% from May to June. This was the 5th consecutive month of lower sales.
- According to Zillow, the average monthly mortgage payment is 20% higher today than in December 2021. Mortgage payments are up 38% from a year ago.
- Median home prices continue to increase, even though the Mortgage Bankers Association weekly survey reports mortgage applications dropped to the lowest level in 22 years.
- In spite of this information, the average home price in the United States is $428,700, up 30% from the 2020 average price of $329,00.
- Annual home value growth set a record for increasing 12 consecutive months
East Bay Real Estate’s Predictions
Even with the uncertainty in the economy and real estate market, the 754,000 homes for sale are still 22.5% lower than the 2021 levels. In addition, there were 386,000 newly listed homes in March 2022, but this is still 8.5% lower than compared to March 2021. While inflation eased slightly to 8.5% in July, it is believed the FED will continue to raise interest rates.
Typically, rising interest rates will cause mortgage payments to increase. This will also affect affordability, meaning some buyers might be priced out of the market. The result is homes staying on the market longer, which causes sellers to lower their prices.
Another factor to watch for is investment firms buying single family homes. According to the National Association of Realtors, it was estimated that institutional buyers made up 13% of the U.S. residential sales market in 2021.
While fewer homes are currently available for sale than last year, any of the above-mentioned factors can cause a dramatic shift in the housing market. We will continue to closely monitor these trends as we near the end of 2022.
