A Rearview Look at 2022 | The Real Estate Market Report
IF YOU ARE CONFUSED BY THE REAL ESTATE MARKET RIGHT NOW…
You aren’t alone. A lot of change has taken place in the economy in the last six months that has left consumers feeling uncertain about the direction of market conditions. In addition, the media is having a heyday spinning the story week after week to try and land a good headline.
What I personally think is helpful to concentrate on in times like these is data. When we look at what the data is telling us and what trends we’ve seen historically, it’s easier to drain out the noise around us to see a more clear and more concise picture of what is to come.
To be clear, there is no crystal ball laying out a play-by-play of how each day will unfold. No, there is just data that suggests what we can expect to come, and from there we get to decide what we want to do with that information.
current real estate market
· Winter is a seasonably low time of year when you look at each quarter throughout the year. Q4 2022 was no different. The combination of inflation caused a lot of people to put purchasing a new home on pause - with 36% of buyers pausing their next move. What does this mean? It means we will have an influx of these 36% of buyers at some point, who will be reentering the market again soon.
· What does this mean for sellers? Well, in 2022 home prices increased by 12.5% (on top of double-digit increases in 2020 and 2021). This is due to a lack of inventory. In a balanced Buyer/Seller market, we see on average 6 months of supply of inventory. Currently, the Twin Cities has 2.5 months of supply. What this tells us is that it is still a seller's market, where sellers will capitalize on year-over-year resale home values, due to a lack of inventory.
· Average mortgage rates over the last 50 years = 7.81%. We are currently hovering at 6% (almost 2% lower than the United States 50-year average). Financial analysts are projecting rates to dip each quarter and reach mid to low 5s throughout 2023. What does this mean? As rates drop, buyers will begin to see their purchasing power increase, and they will be inclined to enter back into the housing market.
cyclical SEASONALITY
As I mentioned earlier, cyclical seasonality plays a large role in real estate activity each month. Q4 holidays and the changing of the season to winter leads to the lowest activity + lowest inventory levels the Twin Cities sees year over year.
The good news - we saw the number of pending listings (homes under contract) come in nearly flat to this time last year (Jan 2021 - prior to the Fed raising rates). March and April are typically peak times of the year when we see the largest amount of buyers entering the real estate market prior to 1) a rental lease end date 2) builders beginning new project builds 3) families moving based on school districts, and more.
February can be a great indication as to what we can expect to see in March and April, and based on the last two weeks, it appears it will be another competitive spring market with multiple offers per home. Just in the last two weeks, I have seen homes receiving up to six offers within 3 days of being on the market.
· Lastly, a great indication of buyer activity for the year is mortgage applications. The great news – within the last 1.5 weeks we have seen mortgage applications jump up by 28%! Buyers are getting prepared to make a move, and sellers should start prepping their homes now to capitalize on the opportunity.
A MESSAGE FOR BUYERS
Now, as a buyer you might be saying to yourself, I’m just going to continue to wait and watch. That is completely fair. The one caveat I would make is would you rather….
Compete with 2-6 other offers, with a slightly increased rate, and refinance in the next 9-18 months OR
Wait a couple of months to see rates drop into the 5’s, re-enter the market as a larger portion of buyers get back into the market, and submit a competing offer against 15 - 45 other offers
Here is some context: In the spring of 2022, I had a buyer submit an offer on a home that received 48 offers, waived all inspection contingencies, and went for more than $150,000 over the asking price. This is not to scare you, it is just the reality of the spring market we were in last year. I for one am LOVING this time when my clients can take their time with offer submissions, receive an inspection of their choosing, and are excited with the overall process.
A MESSAGE FOR SELLERS
Now, sellers…you might be saying to yourselves, I want to wait for that crazy market we had last spring. I don’t want to deal with inspections and want to see large over-asking price bids on my home. I would say two things to you…
Remember when you decide to sell, you will then become a buyer yourself
To receive the highest return on your home, listing preparations should begin in advance. There are strategic ways to prep a home to sell for the highest ROI and the more time you give yourself to prepare, the better you’ll be. I’m of course happy to help!
With all of that being said, I am personally excited to see this year of real estate unfold and to help all of my clients succeed along the way. One of the favorite parts of my job is asking my clients – what are your real estate goals? There are so many ways to approach a move and/or purchase. It is not black and white and is not a one size fits all. It’s my job as an agent to educate my clients on the current state of the state of the market, and align our next steps with my clients’ real estate needs + desired outcomes. I like to say… I assist with navigating the ship and plotting our route, but my clients are the true captains of their voyages.
THE BOTTOM LINE
If you’re in the Twin Cities, don’t hesitate to reach out. I offer free consultations and have a plethora of free advise! For anyone who is looking to make a move outside of Minnesota, I am more than happy to connect you to a licensed agent in your area. This is the largest asset you most likely will be dealing with in your life, and hiring a true profession with the experience you need to help navigate you through the process is my top priority!
Cheers!
Jen
Investor // Landlord and DIYer // Realtor // Business Consultant // Globe Trotter // Converting Vegan.
