Wrapping Up the Year
2022, like 2021, saw a year that started with our real estate market on fire. Low housing inventory was the fuel, and artificially low interest rates threw gas on the fire.
In January 2022, 30-year fixed rates hovered around 3.25%, and the 15-year fixed rate was approximately 2.5%. Plenty of people could afford to buy at those rates!
Abnormally low interest rates gave a lot of folks the ability to simply throw more money at a listing price. As a result, high home values were driven even higher as too many buyers competed for too few houses. The unintended consequence of synthetically low interest rates has been unsustainable inflation of all goods and services, most notably housing.
Good for sellers? Sure, for some, especially if they didn’t have to buy afterwards. And if you’re not selling? Increased equity, but your property taxes may have gone up too, since your home was valued higher.
Getting Back to Normal
When the economy is overheated (too much inflation) the Federal Reserve Board brings the hose to cool things down in the form of higher interest rates. As inflation eases, rates can come down in time.
Due to rising inflation, the Fed increased interest rates six times this year, beginning in March 2022. As of this writing, the 30-year fixed rate is just over 7%, and the 15-year fixed rate is approximately 6.5%. The resulting stabilization of the real estate market was absolutely necessary.
Yet it’s still a good time to buy, because as the old saying goes “you marry the house, but you date the rate”. Refinancing when rates drop again is a virtual certainty for those who buy now. Buying the right house when it’s available is the more important consideration by far.
Many of you tell me you’re concerned about the loss of equity in your home if home values decrease, but if I can leave you with anything at this year’s end, it’s the gift of good news. National headlines may be doom and gloom, but our local real estate market is largely insulated from that due to these factors:
- Our region is always a highly desirable place to live
- Second homes continue to bring buyers here from more urban areas
- Our housing inventory is still low, and our ocean border isn’t one we can build more houses on
Looking ahead to 2023, we expect prices to stabilize by autumn, which is good for sellers and good for your equity position. Buyers and investors will be able to find some good deals, however.
Thank you all for a fantastic 2022 and we’re looking forward to a robust real estate market in 2023. Give us a call and let’s talk real estate!
