Should I Buy a Home in 2022?

Are we all missing a major home buying opportunity?  

From 2020 - early 2022:

In 2020 through early 2022, rates were low, very low.  Everyone knew it! 

Buyers knew it was an incredible opportunity to buy a home at record low interest rates.  The big benefit to record low rates was lower monthly payments.  HOWEVER - most home buyers I've ever known will typically buy the home that matches their desired monthly payment.  Not the other way around.... think about that for a moment.  

Sellers knew it was an incredible opportunity to sell their homes because MORE buyers could afford their home.  Essentially, this created an ideal market for price appreciation, and that is exactly what happened.  

Home prices soared as home buyers where able to afford more house for the money.  

The BIG NEGATIVE during that time period:  20+ offers on the good and even the not-so-good houses that were listed for sell.  Many Buyers were paying well over list price, waiving inspections, waiving appraisals, gifting pre-paid vacations, etc.... anything to get their offer accepted.  The fear was that home prices would continue going up so they wanted to lock in their price and their rate.  

Negatives during the 2020 - early 2022 market:

  • Major bidding wars
  • Buyers paying well OVER list price
  • Buyers waiving appraisals
  • Buyers waiving inspections
  • NO time to think about it
  • NO inventory to choose from
  • NO way Seller is making repairs
  • NO way is the Seller paying towards your closing cost
  • Quality of agent is lower:  Top / Skilled agents were booked solid, you'd have to work with an inexperienced agent.
After July 2022:

NOW we are in a market with rates several points higher than the sub 3% rates some lucky Buyers locked in.   Home prices have stayed about the same (near their early 2022 highs), but affordability has fallen.  In essence, Buyers can no longer afford to purchase at the same price as earlier in the year.  

The result:  Homes aren't selling.  Homes are being listed and are sitting.  

What we are seeing in today's market:

  • Plenty of homes listed for sell
  • Price reductions
  • "Motivated Seller" advertising is making a come back
  • Homes selling below list price
  • Homes expiring after not selling
  • Seller's offering incentives to buy
  • Builders offering incentives

What about interest rates?  

Maybe rates go higher?  What if we are at the new low?  What if they keep going up? 

Over the long haul, mortgage rates average over 7%.  I purchased my first house at 6+ percent and never thought twice about it.  If rates continue to climb, some believe we will see rates back closer to the all time average of 7% - but that's pure speculation.  

Today's interest rates are higher than the sub 3% historically low rates - yes, but there is nothing saying they won't go even higher.  

Maybe rates go lower?  Rates could absolutely go lower should the fed determine they want to kickstart the economy.  If that were to happen, you and everyone else could always refinance the home into a lower rate.  

Will home prices drop?

My opinion is that home prices have already started to drop - slightly.  We are seeing it in the closed prices.  It appears home sellers are starting to be open to accepting less than their list price.  This will start to very very slowly drop the home prices.  

BIG ISSUE:  Inventory.  We need a LOT of inventory coming on the market to really bring down the prices, but that's not currently happening.  Factors affecting inventory:

  • Home builders are NOT building enough homes.  Widely documented. 
  • Home builders have started slowing down on their desire to build "specs". 
  • Baby boomers didn't bounce out of current house.  This has been a big whiff - everyone believed (including me) that an incredibly large percentage of the boomers would start moving down in size or change locations.  Instead they are "aging in place" - the new term in housing.  
  • Less "Sell and Buy up", more "Keep as a rental".  Rentals are in such high demand, home owners have chosen to keep the current home and be landlords.  They are still buying up, but now they have a previous home as a rental.  

What if NOW is the opportunity?  

We may very well be within an incredible buying opportunity.  An opportunity that is unlike the last 2+ years.  It's hard to imagine that this could be the case, but some of the above points summarized below may prove to be one of the best buying opportunities we've seen in recent years.  Here's why:

  • You actually have some choices!  More inventory creates choices - You can shop, compare, sleep on it, and make a good decision without the extreme urgency of the previous market.  
  • Buyer in control:  Negotiate, make lower offers, get some repairs paid by the Seller.  The Buyer is gaining more power in the current market.  
  • Nervous Sellers:  it's no secret, Sellers get nervous if their home doesn't sell quickly.  They are hearing the news too you know - you probably have more leverage in this market than you think.  
  • Rates may go higher:  Lock in now, and enjoy the lower rate.
  • Rates may go lower:  Great, lock in the house now and refinance when they go lower.  

This could very well turn out to be one of the better home buying opportunities.  More inventory to choose from, relatively low rates, this could be it!   

Posted by Brad Officer on
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