It's official, we have survived another year in the Covid-19 pandemic. 2021 was an interesting year. As we all learned to navigate our way back into public, the real estate market has undeniably blown up! Sellers raked in hundreds of thousands of dollars in equity as homebuyers ravenously bid up homes due to lack of inventory.
As we approach 2022, we have nothing but optimism in sight for the foreseeable future. Sellers are continuing to receive multiple offers and great values on their homes despite the "Seasonal Slowdown" and the holiday hustle. Homes are selling in record time and for record prices. Interest rates as well as the unemployment rates are still low which means that people are working and will want to buy more homes!
Unbelievably Low Interest Rates
We began 2021 with historically low interest rates, scraping the bottom of the charts with a 30-Year Fixed rate sitting at a jaw-dropping 2.93%*; for buyers with great credit. What could have spurred a real estate market faster than that? I do not know. All I could hear people say was that "It was like borrowing free money." And it's true! Compared to the astronomically high rates of the 1980's topping out near 20% for a mortgage loan, this was like Christmas all year long!
By the Fed offering such low rates, this did three major things for the real estate market. It encouraged renters to buy, it encouraged homeowners who didn't want to move to refinance, and it provided greater purchase power. By keeping the interest rates lower, people were able to buy bigger, nicer homes because the majority of the payment was going towards principle and not interest.
For example, if you were buying a $500,000 house with a 20% down payment:
$500,000 x 2.93% 30 Yr Fixed = $2,338 / month PITI**
$500,000 x 3.34% 30 Yr Fixed = $2,428 / month PITI**
$500,000 x 2.93% 30 Yr Fixed = $2,410 / month PITI**
$500,000 x 6.00% 30 Yr Fixed = $3,065 / month PITI** 6% Interest Rate in 1960's
$500,000 x 18.00% 30 Yr Fixed = $6,695 / month PITI** 18% Interest Rate in 1980's
Soon into the year, the mortgage companies were all so overwhelmed with refinance requests that refi's began taking 3 months instead of one month. Everyone wanted a shot at lowering their rates and saving a little money every month, or to take some cash out and install that brand new pool they've been dreaming of because NOW they could finally work poolside. Thank you ZOOM!
The loan officer workload was astronomical and so we quickly saw rates start to tick upward. After maxing out at a whopping (I say this sarcastically) 3.34% in March of 2021, the buyers in the real estate market felt urgency to purchase quickly before the rates went up too high. Finally we are ending the year right around a 3.26% for a 30-Year Fixed interest rate.
There has been discussion of the Federal Reserve raising the interest rates multiple times in 2022 to steady the rise of inflation and rapidly increasing home values. What does this mean for you? If you are considering buying a home in the next year, then you might want to make a move sooner than later. Should the interest rates begin to rise, that simply decreases your purchase power. That means that you are going to either pay more for the same house or you are going to pay the same amount for a less nice house.
So Many Offers!
To put it bluntly, the real estate market was nuts this year. Just like a Gwen Stefani song, "This $h!t was bananas, B-A-N-A-N-A-S... I hope I spelled that right...
Homes sold SO FAST that if you weren't fully pre-approved and available to view a home on Friday morning to present an offer by 5pm, then you could have missed out on your future dream home. As new construction home waitlists soared past the 10's, 20's, and 100's of prospects, there just weren't enough homes in California to satisfy the intensely high home buyer demand.
As the Covid-19 pandemic created a revolutionary wave of remote workers, ZOOM took over the world and everyone started working from home. This huge shift allowed many Bay Area renters to break free from their tiny-tech-AirBNB bubbles to explore new atmospheres such as Tahoe, Reno, and the Central Valley. What better place to move to afford a significantly larger home but to still be close enough to commute to the Silicon Valley maybe once or twice a week?
As the Bay Area bunches came plummeting over the Altamont, the local real estate market saw a surge in multiple offers and up-bidding. It's not unusual for beautiful listings to sell for list price or maybe $5, $10, or $15,000 over list price. But this year we saw offers being submitted in the first day at $10, $20, $40,000 over list price; and that's in Modesto. I spoke with other agents who told me stories of areas like Oakland, Alameda or Livermore that would get bid up by $100,000 or more! That's why I say that the market was NUTS this year.
On the bright side, this trend could not feasibly last forever. At some point, people just say "ENOUGH! I am not paying that amount for that house" or "I can't afford what I want, so I will wait". Which is where the leveling out process comes into view.
Entering into 2022
As we climb out of our seasonal slowdown and embrace the real estate market of 2022, things are looking solid and steady. To my home buyers out there, there are a few things that you need to keep in mind. Homes are still selling quickly and it's still a great time to sell; whether the market levels out or continues to rise. Either way, you have likely made a LOT of equity since you bought your home in the last 5+ years.
When you start considering selling your lovely home, it's important to hire someone that you like to work with, someone that will keep your best interest in mind, and it doesn't hurt if she knows the house better than anyone else because she sold it to you. 😉
As a buyer, you want to hire a local Realtor that knows the market that you are searching in. You need to have someone that has a solid pulse on what it takes to submit the strongest offer and how to get it accepted. Sending in the highest offer, or being a cash buyer doesn't always cut it anymore. There are many more moving parts. If the Seller is buying a brand new home, then they may want a rent-back so they don't have to move twice. If you are the highest offer but you don't remove your appraisal contingency and someone that is $5,000 less than you does, then they may have a more appealing offer to the Seller. It's best to hire a professional to guide you through the process so that you can focus on your already-busy life.
A Little About Me
This year was very different for me. I actually did the least amount of business that I have done since I acquired my real estate license in 2015. But yet, I felt busier than ever... Last year, Ryan and I were blessed with a healthy, handsome little boy. Now I have my little assistant and I have embraced my new life as the "Mommy Realtor".
My day-to-day has definitely shifted and I have a new perspective on real estate and on transitioning families from one home to another. Mornings are much different when all you have to worry about is curling your hair and grabbing your Starbucks latte on the way to the office versus caring for, feeding, and entertaining a tiny human all day long. It's busy, but perfect and I love it! Thankfully I am able to work with great clients that live real lives, who have kids, and busy schedules, and who understand that they might hear a little maniac in the background from time-to-time. Community is so important, because we are all in this together.
In 2021 my resale partner, Pablo Gomes Franco, and I helped a dozen families transition from older homes to new homes, and some from new homes to newer homes. We appreciate the opportunity to assist all of you with these major life changes. We understand the responsibility and we are thankful for your trust. We are very optimistic for 2022 and I hope that you will be confident in referring your loved ones to us for any of their real estate needs.
Cheers to a New Year of infinite possibilities! 🥂
*Interest Rate data derived from: https://time.com/nextadvisor/mortgages/mortgage-rates-history/
**Figures calculated using Google Mortgage Calculator: https://www.google.com/search?q=mortgage+calculator&oq=mortgage+&aqs=chrome.0.35i39j69i57j35i39j69i60j69i65l2j69i61j69i60.1196j0j7&sourceid=chrome&ie=UTF-8 - Figures and estimates are meant for comparison purposes and are not meant to be offered as an actual estimate to any prospect. Anyone wanting accurate loan information should contact a licensed mortgage loan officer.
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