Summer is over, what is next for 2022 Housing Market

Just as the housing boom during the pandemic years was incredibly unexpected, the impossible hit us again that the mortgage interest rate has gone above 6%. Is this really possible? To market experts, such as economists, professional mortgage lenders, and professional Realtors, this is not a shock. Many have been saying for years including myself that the low rate would not last forever. No matter if you have or haven't experienced the 2007-2009 economic downturn, many of us wonder: Will the interest rate continue to rise? Will there be more home options? Will the house market crash again?

A good news for home buyers is that the seemingly unstoppable seller's market is cooling and in some neighborhoods, the seller's market has turned to a more balanced market, even though not quite a buyer's market yet. This means fewer homes are sold above asking price and homes are not sold immediately after it gets on the market. In fact, homes for sale now more likely to enter in contract after it stays on the market for more than two weeks. Sellers also start to initiate price reduction. Home buyers finally have a chance to negotiate for a purchase price that can be lower than the asking price.

The speed of the home price increase has already slowed. Yet economists are still confident we will not experience the housing market crash that took place between 2007 to 2009. The lending standard has become much stricter after the lesson learned from the last crash. Most households that use mortgage to purchase their homes are on a much stronger financial footing and the mortgage delinquency rate is extreme low. National Association of Realtors expect there can be a price decline in the next six to nine months. However, the anticipated price decrease can be less than $26,000 for an existing home at the median value. In comparison to the significant equity growth, this number is a small percentage but still provide buyers with some potential relief.

Fundamentally, price is determined by demand and supply. While homes are not flying off the shelf, there's still not enough inventory on the market. Some potential home sellers are reconsidering whether they should sell and move to a bigger home because they do not want to trade their current low mortgage rate to a much higher rate. However, the demand side is slowing as well. Many potential home buyers are priced out of the market because of the monthly payment increase caused by the increased interest rate. Only the determined home buyers who are still qualified with a much higher rate can stay in the market.

If you are one of those home buyers, the next few months can be the right time for you to take the next step. The current market condition gives home buyers leverages they haven't had for the last two and half years, the opportunity to ask for a lowered purchase price, the opportunity to ask for credits. If you are worried about the high mortgage interest rate, next time, we will talk about how to use ARM (Adjustable Rate) to get into your home with an initial lower rate and the opportunity to refinance when the mortgage rate returned to a lower level.