“Is the real estate market going to crash in 2022?” That’s a question many people were asked to many Salida Realtors. In Salida, California we see the following trends (courtesy of Realtor.com):
- The median listing home price was $452,500 in January 2022, up 16% year over year
- Homes sold for 1.43% above the asking price
- Homes in Salida sold after 58 days on the market in January 2022, up from 49 days in January 2021
In California overall, the state saw a double-digit increase in home prices for the 17th straight month. While December’s monthly sales pace was down 5.4% from November and 15.7% in December 2020, the state also saw a new yearly record median price of $786.750 for the year, up more than 19% from the previous year.
There are many factors to consider that could impact the real estate market in Salida and around the United States in 2022. Here are some of the key points to consider:
According to the California Association of Realtors, the California housing market will remain strong;
- The median home price in California is expected to rise 5.2% to $834,000 in 2022.
- Existing, single-family homes are forecast to total 416,800 units in 2022, down slightly from 2021’s pace of 439,800.
- Housing affordability is expected to drop slightly from 26% in 2021 to 23% in 2022.
While no one can say for certain if the housing market will crash in 2022, here are a few trends to monitor closely:
Higher Interest Rates
On February 11, 2022, a survey of the nation’s largest mortgage lenders saw the average rate for a 30 year fixed mortgage was 3.99%, up 1 basis point over the previous 7 days. The average 15-year fixed mortgage rate was up 3,33%, 10 basis points higher than the previous week.
A rise in interest rates could make homes more expensive, which could lead to fewer homes being built. Some believe this will have little effect on the housing market due to tight inventory and increased demand from millennials. Millennials make up the largest demographic of home buyers and are expected to buy homes in 2022.
Home Builders Confidence
The Home Builder’s Confidence Index is a measure of confidence in the economy from those in the home building industry. In February, builder sentiment continued to decrease February from 83 to 82. This decrease is primarily due to persistent bottlenecks with building material production and supply chain issues. This can delay projects and raise construction costs and have a negative effect on the real estate market if this trend continues.
Number of Homes For Sale
More buyers than sellers is a key indicator of market trends. In January 2022, the inventory of homes for sale decreased by 28.4% nationally. (In December it was 26.8%). This was the 4th consecutive month of decline compared to 2021. Inventory is still low, with unsold homes nationwide down 17.9% from January 2021.
In addition, newly listed homes declined by 9.1% compared to 2021, with seller listing rates at 16.1% lower than 2020 levels. This indicates the home supply is still tight and demand for homes is still strong.
Tax Code Changes
Abolishing tax breaks for real estate investors could have a major impact on the housing market. President Joe Biden has proposed a plan that would eliminate the like-kind or “1031” exchange, which is the ability to defer specified tax payments on property-investment gains of over $500,000. It is thought by some this would cause the investment in real estate to decrease, rents to rise and property prices to decrease significantly.
Stock or Bond Market Collapse
Many believe both the stock and the bond markets are overvalued due to a major correction. Currently, the threat of war between Russia and Ukraine has caused volatility in the stock market. Further escalation of the conflict could cause a chain reaction that could impact the housing market.
In the 3rd quarter of 2021, a report from ATTOM found that 94,766 single-family houses and condominiums in the United States were flipped in the third quarter. This represented one in eight transactions or 5.7% of all home sales. This figure is up for the second quarter in a row after 12 months of declines. These numbers are still low compared to 2006 when house flipping accounted for 11.4% of home sales. An increase in house flipping is often viewed as a sign of an impending housing crash.
Putting It All Together
No one knows the future but studying history can be a great way to predict what could happen next. Each of the events described here is a great way to gauge the real estate market and predict what could happen next. By paying close attention to the trends, you could be better prepared for whatever the future holds.
Are you looking to buy or sell your property in East Bay? Need help determining your next move? Here at Range Homes, we have a team of motivated agents dedicated to putting your needs first. Our mission is to get you the best deals & offers and help you buy (or sell) your home. For assistance with your real estate transactions during these challenging times, Range Homes is here to help. Reach out to our team today by clicking HERE.