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Q3 Market Update | Oct 2022

Writer's picture: Jessica NickellJessica Nickell

🍁 As we fall into Autumn, our new school schedules, and into some spooky Halloween stores, many of us are keeping a quiet eye on the real estate market. The housing market BLEW UP over the last two years due to the Covid-19 pandemic. As the virus spread rapidly and shut down the global economy, spending stopped, stores shut down, and toilet paper became more rare than diamonds. Once we were able to gain a stable level of “herd immunity”, then the pent up demand TOOK OVER! We saw rampant amounts of real estate up-bidding, price hikes, and home supply shortages. In layman’s terms, people were buying up houses like they had been buying up toilet paper!


🎃 With Halloween just around the corner, you are probably adorning your lawn with a new Nightmare Before Christmas inflatable and stacking your candy bowls with Reese’s (that you are totally going to eat yourself before Halloween even gets here…) Well, my candy-clad-clients, I am dead serious when I say that you don’t have to be scared of this changing market. I have some tricks and treats to help you HULK SMASH this current market!


Read On... Or Watch Instead




MARKET UPDATE | OCTOBER 2022




INFLATION


In March 2022, we began to see a slow down in real estate sales. Inflation had grown from 5.9% in March to an unbelievable 9.1% by June; so high that the Fed began raising interest rates to slow the volatile levels of inflation. Historically, this has been the “go-to” method for the Fed whenever inflation starts to get out of control. Prices can only continue to drastically rise for so long before buyers will eventually say “That home is not worth that price to me, I will just stay in my current house” or “I can’t afford those payments, I guess I will just keep saving.” Fast forward to October 2022, we are battling prices at the gas pump, in the meat aisle at our grocery stores… The struggle is REAL! Thankfully inflation rates were down to 8.2% in September.



INTEREST RATES


As home buyers take their time to find the perfect home, interest rates continue to rise. Higher rates equal higher payments which eventually push some buyers out of the market. Interest rates are directly influencing seller prices right now. If you have been watching your neighborhood on Zillow, then you are likely seeing PRICE DROPS almost daily. Our generation was definitely spoiled by the 2-3% interest rates during the Covid-19 pandemic. But it’s best to look over the historical life of mortgage rates to realize that these were unprecedented rates during an unprecedented time. Back in the 1980’s, interest rates rose to 18%. Overall an average mortgage rate has historically landed somewhere in between 4-6%; which is where we have wound up this year. The primary difference is that when interest rates were 6.5% in September of 2002, home prices were averaging $206,000, not $473,000 like they are today.


Payment Estimate:


You can see that the estimated monthly mortgage is more than DOUBLE what it would have been 20 years ago. Obviously, wages have gone up to help offset these figures. Nevertheless, overall prices have grown so high that it is difficult for new buyers to enter the market, keeping the door open for investors to collect inventory and control rental rates.



PRICE DROPS


In the spring of 2022, we had heard forecasts of home prices leveling out. But now, we are starting to see a full-on correction. In March of 2022, closed sales averaged $13k over list price, whereas September 2022 shows closed sales as $8k under list price. Many sellers are panicking and holding off the market or are holding strong in their list price position. However, it’s time to look at the big picture. You can look at it as though you “lost” $20k by not selling 6 months ago OR you can see that if you bought in Sept 2019 (only 3 short years ago), for an average sales price of $350,000 and your home is still worth $470,000 today, then you are still netting around a $100k which is HUGE for a home that you have only lived in for 3 years! Even if you had bought a home during the market crash of 2008, it still would have taken you almost 10 years to gain $100k in equity; based on the average sales prices in the chart.



WHAT DOES THIS MEAN FOR SELLERS?


Sellers, the forecasts for the remainder of the year show a continuing rise in interest rates. Rates are already over 7% now in October and we keep hearing about a potential ¾ point increase before the end of 2022. Experts are saying that 8% interest rates by December are not impossible; the highest that we’ve seen in 22 years! Sellers, if you sell your house today then you aren’t going to get the price that your neighbor sold their house for a year ago, it’s just not going to happen. BUT the price of the new house that you are looking to buy has likely decreased in price as well. We cannot focus on prices that we “could’ve gotten” when “we should’ve listed”; everything is relative. We just have to continue to roll with the punches. Sitting on the side lines to wait, may cost you in the long run.


I recommend that you sit down with a real estate professional to evaluate your equity stance in your home. After that, you should meet with a qualified loan officer to learn what budget you qualify for with today’s rates. Then you go house shopping and HAVE YOUR REALTOR NEGOTIATE FOR YOU! We have spent too many years up-bidding prices, it is time for Realtors to start negotiating again. That’s literally what we are here for.



WHAT DOES THIS MEAN FOR BUYERS?


Buyers, have you ever heard anyone talk about how they wish they would have bought 20 houses during the 2008 market crash??? Well, this is your moment! This is a loving wake-up call from The Mommy Realtor letting you know that THIS IS YOUR TIME! This is the time to negotiate! We have spent too many years up-bidding prices, it is time for Realtors to start negotiating again. This is the first time in years that you are actually likely to get a GREAT DEAL on a house!



WHAT IF I CAN’T AFFORD THE PAYMENT?


What if I can’t afford the payment? I am so glad that you asked! There’s a saying that goes like this, “Marry Your House. Date Your Rate. Divorce Your Rent.” Well first of all, I am ALL ABOUT divorcing your rent! If you have saved a little money and have great credit, then you SHOULD be looking to buy! Even if it’s for a rental property that you won’t even occupy. Marrying your house… Well, consider it a Hollywood marriage because no one stays in their houses forever anymore. Haha! But the focus for today is “DATE YOUR RATE”. What does that mean? How do you date your rate if you have a 30-year fixed mortgage? Refinance. Experts are forecasting that interest rates will dip back down by 2024. So the end-goal is to refinance once rates are lower and you have a larger equity stance in your home. So the buying strategy is to get a Seller to offer you enough closing cost credits so that you can talk to your lender about interest rate buy down programs. BOOM! Did you get that? Buying down your rate equals buying down your payment! That means that the Seller is going to HELP YOU acquire a more affordable payment!



So as you sit back and sip on that pumpkin spice latte or sneak a couple of Reese’s from that Halloween bowl, you might start feeling a little more relaxed about this market. Definitely less scared, and maybe even a little curious… I’d like to personally invite you to call me with any real estate questions that you may have. I’d love the opportunity to talk real estate with you soon!




Happy Halloween! 🎃

Jessica Nickell

The Mommy Realtor & The Baby Assistant



925.321.1440





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JESSICA NICKELL  |  REALTOR LIC NO 01968827 & BROKER LIC NO 02227929

 

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