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.
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.