Fall Into Place
How much will home prices go up in 2022? This is a question we get asked quite a lot lately. In a typical real estate market home prices rise 3-5%. Despite what the world may be saying, this year we will more than likely exceed that percentage because of low supply and still higher demand. Yes, we are in a transitional market (where the sellers are no longer in full control and interest rates are higher than previous years), but consensus among the top industry organizations including Fannie Mae and Freddie Mac, as well as the Mortgage Bankers Association, predict that home prices will rise 10.3% when compared to 2021. With inflation at 8.5%, the real estate market is still a good investment.
The bottom line is it is still a great time to buy a house. As a renter, it is important to know that rents are rising quickly, and in some areas as high as 14.8% from the previous year. Interest rates have come down the last few weeks and although they are not back in the 4% range, they are still lower compared to the average over the past 30 years. Sellers are becoming more motivated in their pricing as the average days on market continue to rise. Surprisingly, price reductions are becoming more common and at a higher percentage than what we saw “post-pandemic” (September 2020). Bidding wars or multiple offers on the same property have also continued to ease up over the last several months.
All in all, this is absolutely great news! But as most of us who are older than 21 know, with good news usually comes some balancing sober news. In this transitional market, we personally see buyers and sellers both volleying for power. It’s important to keep in mind that during transitional markets, neither party is fully in control and both buyers and sellers need to keep their eyes on the finish line.
Cancellations or terminations on contracts are becoming more common now and close to the levels we saw right after the pandemic hit. For example, in March and April of 2020, statistics show 17.5% of escrows were terminated. This past July we saw 16.1% of contracts terminating (slightly up from 15% in June 2022). By comparison, in June of 2021 only 12% of real estate contracts were terminating mid-escrow. This increased percentage in cancellations are due to a number of reasons, but let’s focus on the reasons we can control. Sellers sometimes can feel like they are still operating in a seller’s market and they will capture another buyer if their primary offer falls. Buyers can feel like there is a lot more to choose from, “so if this one doesn’t work out, there are others.” In our experience, a lot of contracts can be salvaged if both parties (and their Brokers) remember the old saying, “A bird in hand is better than two in the bush.”
We are back to real life real estate, folks; nothing more and nothing less, and there is no need to be fearful. Our team will still be kicking up the dirt and working our files like our client’s future depends on it.