Are we about to see an upheaval in the housing market? It would not be surprising.
Real estate experts who predicted a continuing rise in prices just a couple of months ago are now saying they aren’t so sure about that. In fact, I heard someone on TV predicting a crash. (But of course, you can hear anything on TV – it’s just someone’s opinion.)
A variety of factors are at play that may cause home prices to level off or even drop. Rising interest rates and inflation may cause some buyers to postpone their plans to own a home, while others may have to adjust their sights downward.
A person who can afford a $1,000 per month principal and interest payment could afford a mortgage loan of $237,189 when the interest rate was 3%. Now that the rate has gone to 5%, they can afford a loan of $186,281.
The Fed says interest rates will go up “several more times” this year.
Should that cause you to panic? No, there will always be people buying homes. When I was first licensed in 1985, interest rates were bouncing from 9% to 11%. It took longer to find a buyer for each home, and those that were overpriced didn’t sell at all, but we did sell homes.
It may cause you to work a little harder, and it may cause a few of the less dedicated agents to drop out. Considering the comments I read about agents who don’t do their jobs well, you may agree that that’s not necessarily a bad thing.
Should you be worried about an upheaval in the housing market?
No, you should just be ready. If your buyers need to adjust their sights downward, you may need a few more closing each year to maintain your current income.
I know, not easy when demand is still so much higher than the supply. But that could change.
Homeowners who see 2022 as the peak of the market, and especially those who think prices will drop, may now decide to sell. Upheaval in the housing market could increase supply while it reduces demand, so that the market can come back into balance.
If you work with buyers, my guess is that you wouldn’t mind not having to write a dozen offers to get one acceptance. However, depending upon your price category, you may have fewer buyers.
According to Zero Hedge, housing affordability is now at its lowest level since 2008.
New construction will also play a role.
The scarcity of homes for sale has been partially responsible for the rise in prices. It’s simply the law of supply and demand at work.
For several years after the crash, new construction slowed. But now, despite high materials costs and a labor shortage, builders are working hard. Experts expect to see 1.65 million new homes coming on the market in 2022 and another 1.2 million in 2023.
Keep a close watch on trends in your local market.
- Are more homes expiring off the market unsold?
- Are you seeing price reductions?
- Are your “sold” prices changing?
Be sure you can answer questions about the market when buyers and sellers seek your expertise.
Meanwhile, encourage your prospects to consider selling this year.
Only a fool (or a talking head on TV) would make an absolute prediction regarding the upheaval in the housing market. But it would be good for you if a few more people decided to list with you.
To help you get your prospects thinking, I wrote a new set of letters. Why Homeowners Should Consider Selling in 2022 is a set of 6 letters that simply state the issues affecting the housing market, and what their effects might be. Of course they also invite homeowners to call and discuss the situation with you.
If the trend continues as expected, prices may well come down or simply level off and stop soaring. But even if homeowners can see that happening, it may take them a few weeks or even until the end of summer to make the decision to sell. So stay in contact. Send these 6 letters (or some that you write yourself), then follow up with periodic market reports plus your just listed/under contract/just sold messages.
Make sure that YOU are the one they think of when the time comes to sell.