Even if you haven’t been following real estate news, you’ve likely heard about the current sellers’ market. That’s because there’s a lot of talk about how strong market conditions are for people who want to sell their houses. But if you’re thinking about listing your house, you probably want to know: what does being in a sellers’ market really mean?
What Is a Sellers’ Market?
The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows housing supply is still very low. There’s a 2-month supply of homes at the current sales pace.
Historically, a 6-month supply is necessary for a normal or neutral market where there are enough homes available for active buyers. That puts today deep in sellers’ market territory (see graph below):
What Does This Mean for You When You Sell?
When the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. That creates increased competition among purchasers which can lead to more bidding wars. And if buyers know they may be entering a bidding war, they’re going to do their best to submit a very attractive offer upfront. This could drive the final price of your house up.
And because mortgage rates and home prices are climbing, serious buyers are motivated to make their purchase soon, before those two things rise further. That means, if you put your house on the market while supply is still low, it will likely get a lot of attention from competitive buyers.
The current real estate market has incredible opportunities for homeowners looking to make a move. Listing your house this season means you’ll be in front of serious buyers who are ready to buy. Let’s connect so you can jumpstart the selling process.
There’s never been a truer statement regarding forecasting mortgage rates than the one offered last year by Mark Fleming, Chief Economist at First American:
“You know, the fallacy of economic forecasting is: Don’t ever try and forecast interest rates and or, more specifically, if you’re a real estate economist mortgage rates, because you will always invariably be wrong.”
Coming into this year, most experts projected mortgage rates would gradually increase and end 2022 in the high three-percent range. It’s only April, and rates have already blown past those numbers. Freddie Mac announced last week that the 30-year fixed-rate mortgage is already at 4.72%.
Danielle Hale, Chief Economist at realtor.com, tweeted on March 31:
“Continuing on the recent trajectory, would have mortgage rates hitting 5% within a matter of weeks. . . .”
Just five days later, on April 5, the Mortgage News Daily quoted a rate of 5.02%.
No one knows how swiftly mortgage rates will rise moving forward. However, at least to this point, they haven’t significantly impacted purchaser demand. Ali Wolf, Chief Economist at Zonda, explains:
“Mortgage rates jumped much quicker and much higher than even the most aggressive forecasts called for at the end of last year, and yet housing demand appears to be holding steady.”
Through February, home prices, the number of showings, and the number of homes receiving multiple offers all saw a substantial increase. However, much of the spike in mortgage rates occurred in March. We will not know the true impact of the increase in mortgage rates until the March housing numbers become available in early May.
Rick Sharga, EVP of Market Intelligence at ATTOM Data, recently put rising rates into context:
“Historically low mortgage rates and higher wages helped offset rising home prices over the past few years, but as home prices continue to soar and interest rates approach five percent on a 30-year fixed rate loan, more consumers are going to struggle to find a property they can comfortably afford.”
While no one knows exactly where rates are headed, experts do think they’ll continue to rise in the months ahead. In the meantime, if you’re looking to buy a home, know that rising rates do have an impact. As rates rise, it’ll cost you more when you purchase a house. If you’re ready to buy, it may make sense to do so sooner rather than later.
Mark Fleming got it right. Forecasting mortgage rates is an impossible task. However, it’s probably safe to assume the days of attaining a 3% mortgage rate are over. The question is whether that will soon be true for 4% rates as well.
Purchasing a place to live is one of the biggest decisions of your life. Even in an ideal scenario — a buyers market with plenty of affordable houses and scant competition — the stress of buying a home is not something to take lightly. And today’s buyers are not living that ideal: Prices remain high, inventory cannot satisfy demand, and competition for the few homes available often leads to bidding wars (fortunately, there are some effective ways to prepare for that). Add to all of this rising interest rates, and it’s a potentially intimidating time for homebuyers.
To better understand how to prepare emotionally for what can be a marathon search, we spoke with Christina Koepp, a licensed mental health counselor at Wellspring Family Services, and asked her to weigh in on what home shoppers can do to cope with this pressure-cooker of stress.
What makes buying a home so stressful?
Buying a home can invite pressure from every direction. Let’s look at just a few of the potential stressors.
Choosing a home
A home purchase is one of the most significant financial decisions many people make in their lifetime, and on top of that, the process affects basic necessities like shelter and safety.
“Buying a home taps into all parts of our mind: our basic need for shelter, our attachment needs for a safe place to connect with ourselves and others,” says Koepp. “To take the risk and make an offer on a home, we need to be willing to attach to a new place to live, and — simultaneously — hold it loosely enough that it won’t be devastating to lose the bid. It’s a narrow path of guarded optimism.”
The real estate market
Just about anywhere you look in the U.S. these days, you’ll find a sellers market. This can make the stress of buying a house feel even more pronounced. A sellers market can bring anxiety accelerators like seemingly endless open houses, bidding wars, and getting outbid by all-cash buyers.
The loan approval process
If you’re working with a lender, the process can take weeks or longer. Expect lots of paperwork, which can be all the more grueling if your dream home is waiting. (To ease some of this tension, get pre-qualified before you find a place you want.)
Working with an agent who’s not a fit
Almost one in five buyers (18%) report that it’s “difficult or very difficult” to find the right real estate agent. If your agent isn’t a good fit, they can add pressure where they should be alleviating it.
Read on for tactics on how to navigate what can be both a stressful and exciting journey.
How can I mentally prepare for the stress of buying a house?
“If you ‘fall in love’ with every home you see, it leaves little room for discerning which is the best fit,” Koepp says. “And you can quickly become emotionally fatigued with each lost bid or opportunity.”
Instead, it can be helpful to think of your home buying journey as a balancing act between vulnerability and healthy detachment. In other words, try to be “vulnerable enough to imagine your life in this potential new place,” says Koepp, while simultaneously employing “the very healthy protective impulse of avoiding getting attached too fully and too quickly.”
Some more tips:
Think about your hopes and preferences in general terms
With each new home, ask yourself how you’ll feel if you don’t get it, says Koepp. When you encounter a loss, talk about it with someone. Discuss what excited you about the home, then carry that forward in your search. In short, keep an open mind as you search for your dream home.
Avoid all-or-nothing thinking by considering your preferences in a general sense — an updated home, an architectural style, a set of neighborhood characteristics, etcetera. This can remind you that there’s more than one place to find joy and contentment.
Identify your non-negotiables as clearly as possible
The way to balance being general with your wants is to be as clear as possible with your deal-breakers. “Know before you look if you’re really only open to a condo with three or more bedrooms, or a house with a garage,” says Koepp. “It’s easy to be swept up in a home that may have some dream elements, even though it has deal-breaker issues.”
Above all, Koepp says, offer yourself the grace that this won’t always be a neat and tidy process. “You get to be human in the midst of it.”
Find the right agent to help you cope with the stress of buying a house
Your agent is your guide through an often complicated journey. Make sure they provide peace of mind and not the opposite. If your agent is doing something that makes you uncomfortable, communicate it to them. Further, clearly articulating your wants, preferences, and non-negotiables will help your agent get aligned. This can ease your mind and allow you to focus on what’s important. If it’s still just not a fit, consider looking for a new agent.
Tips for easing the stress of buying a house in the current housing market
Manage your expectations
“Prepare for a marathon, even if it’s just a sprint,” says Koepp. You don’t know how long it will take to have an offer accepted. “It could be a couple homes you offer on; it could be 12.” Keeping your expectations flexible helps avoid disappointment.
Extend kindness to yourself
Koepp says this part can be challenging for some people. “It can be easy to doubt your judgment, become angry with your home-buying partner, or get obsessed with searching,” she says. “All these responses are understandable! Being kind means finding ways to rest, recharge and integrate each step along the way.”
A few things to try: Take a short break from scrolling through listings to re-center yourself, prepare a comforting meal after a lost opportunity, or be intentional about regularly getting to bed earlier, if you can.
Talk about your home buying stress with someone you trust
It’s helpful for many people to simply “say out loud what’s rolling around in their mind,” says Koepp. “Some prefer to journal. Use whatever works for you; try to share the challenges, insights, dreams and goals that you’re noticing. Reach out often to loved ones to keep your awareness, energy, and perspective in line with your goals and hopes.” This will help you process as you go.
How to bounce back after an unsuccessful offer
First, pause to reflect, then let it go
Koepp says it’s important to honor the deep disappointment that can result from a lost opportunity you felt invested in. “Take a few hours or even a couple days to acknowledge that experience, and know it will fade.” Next, find a way to feel gratitude. This may help counter the propensity to dwell solely on what was lost.
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The super-charged housing market of the past two years is expected to tick down a notch in 2022, but the same conditions that pushed home values and home sales to record highs in 2021 are likely to persist, making the coming year another tough year for buyers, according to an analysis by Zillow economists.
The economists predict that the current sellers’ market will continue into 2022, driven by the same factors that drove up home values by double-digit percentages in 2021: A tight supply of for-sale homes, plenty of millennial and baby boomer buyers competing for those homes, low mortgage rates, and a shift toward remote work that opens new possibilities for home shoppers.
Collectively, the market dynamics are likely to translate into bidding wars on many homes, especially during the traditional spring and summer shopping season when the market heats up.
Here are four real estate predictions to watch for in 2022.
1. 2022 home value growth will fall just short of record-breaking
Zillow’s forecast calls for an 11% increase in home values in 2022. That’s down from the 19.5% jump projected for 2021, but still among the strongest years since Zillow began tracking home values.
As of November 30, 2021, the typical U.S. home was valued at $316,368. An 11% increase would add another $34,800 to the price of a typical U.S. home.
Sales of existing homes are predicted to reach 6.35 million in 2022, the highest number in the past 14 years. In 2021, 6.12 million existing homes were estimated to change hands.
2. Sellers keep the upper hand
The past two years obliterated the usual seasonal patterns for sales. There were signs in the fall that we could return to the usual seasonal cooldown in the housing market. Data showed that fewer homes were selling above list price, homes were staying on the market a few days longer than they did during the summer, and more sellers were cutting their price.
By late December, however, the autumn cooldown appeared to have run its course. Monthly price appreciation slowed, but barely. Inventory shrank, falling below 2019 levels.
All the evidence points toward this winter providing less of a break for buyers than many had hoped. Overall, the market is expected to cool slightly in 2022, but not enough to make it a buyers’ market.
3. ‘Sun Belt’ cities remain places of explosive price growth
Home prices in some of the larger Sun Belt cities — those located in the southernmost portion of the United States — saw explosive growth in 2021. As larger cities like Austin and Phoenix become less affordable, buyer demand is expected to push out to smaller Sun Belt cities, raising prices in those metros in 2022.
As of October 2021, 24 of the top 25 markets were in sunny states — a sign of things to come in 2022.
Zillow economists expect fully remote workers to continue seeking affordable markets, like those in the Sun Belt and other nontraditional housing hot spots where they can afford to buy their first home or trade up for a bigger one.
Traditional retirement markets also are likely to see elevated demand as a generally aging population seeks new living arrangements in retirement.
4. More Gen Zers and millennials will buy a ‘second home’ before a primary residence
With millions of Americans working from home and other remote locations, 2022 could see a new trend where the youngest buyers purchase a vacation or investment home before buying a primary home to live in full-time.
Younger people tend to favor urban areas with amenities, while recognizing that housing in those cities can be extremely expensive and often out of reach. As they explore remote work in more affordable places, they are becoming more willing to invest in a part-time vacation home or investment property to break into the market and start building equity while they explore their options.
If you’re thinking of selling your house this year, timing is crucial. After all, you’ll want to balance getting the most out of the sale of your current home and making the best investment when you buy your next one.
If that’s the case, you should know – you may be able to get the best of both worlds today. Here are four reasons why this spring may be your golden window of opportunity.
1. The Number of Homes on the Market Is Still Low
Today’s limited supply of houses for sale is putting sellers in the driver’s seat. There are far more buyers in the market today than there are homes available. That means purchasers are eagerly waiting for your house.
Listing your house now makes it the center of attention. And if you work with a real estate professional to price your house correctly, you can expect it to sell quickly and likely get multiple strong offers this season.
2. Your Equity Is Growing in Record Amounts
According to the most recent Homeowner Equity Insight report from CoreLogic, homeowners are sitting on record amounts of equity thanks to recent home price appreciation. The report finds that the average homeowner has gained $55,300 in equity over the past year.
That much equity can open doors for you to make a move. If you’ve been holding off on selling because you’re worried about how rising prices will impact your next home search, rest assured your equity can help fuel your move. It may be just what you need to cover a large portion – if not all – of the down payment on your next home.
3. Mortgage Rates Are Increasing
While it’s true mortgage rates have already been climbing this year, current mortgage rates are still below what they’ve been in recent decades. In the 2000s, the average mortgage rate was 6.27%. In the 1990s, the average rate was 8.12%.
For context, the current average 30-year fixed mortgage rate, according to Freddie Mac, is 3.85%. And while recent global uncertainty caused rates to dip slightly in the near-term, experts project rates will rise in the months ahead. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, says:
“For homebuyers, we believe that borrowing costs will likely rise with the increase in mortgage rates….”
When that happens, it’ll cost you more to purchase your next home. That’s why it’s important to act now if you’re ready to sell. Work with a trusted advisor to kickstart the process so you can take key steps to making your next purchase before rates climb further.
4. Home Prices Are Climbing Too
Home prices have been skyrocketing in recent years because of the imbalance of supply and demand. And as long as that imbalance continues, so will the rise in home values.
What does that mean for you? If you’re selling so you can move into the home of your dreams or downsize into something that better suits your current needs, you have an opportunity to get ahead of the curve by leveraging your growing equity and purchasing your next home before prices climb higher.
And, once you make your purchase, you can find peace of mind in knowing ongoing home price appreciation is growing the value of your new investment.
If you want to win when you sell and when you buy, this spring could be your golden opportunity. Let’s connect so you have the insights you need to take advantage of today’s incredible sellers’ market.