IIt’s fair to say that 2021 has been an interesting year for real estate, and 2022 is shaping up to be similar. Now, in the absence of a crystal ball, it’s impossible to predict what the housing market holds in February, but here are some predictions based on recent trends.
1. Mortgage rates will continue to rise
Mortgage rates settled at higher levels in January 2022 than they have been at any time in 2021. And based on this upward trajectory, there is reason to believe that rates will continue to rise. increase in February, although perhaps at a slower rate than in January.
One of the main reasons why we can continue to anticipate rate hikes is that the Federal Reserve plans to raise interest rates. And while the Fed doesn’t set mortgage rates (or consumer interest rates, for that matter), its actions can influence them. Also, rates were at extremely low levels from mid-2020 to early 2022. And frankly, we were expecting a slight uptick.
2. Housing stock will remain low
At the end of December, the US real estate market had a 1.8 month supply of available homes, according to the National Association of Realtors (NAR). For context, it takes a 4-6 month supply of homes to create a balanced housing market, as opposed to the current market, where sellers clearly have the upper hand.
Given that home listings tend to be slow during the winter months, we shouldn’t expect a noticeable increase in inventory in February. On the contrary, inventory levels could decline as buyers rush to buy homes before mortgage rates climb even higher.
3. House prices will remain high
In December, the median price of an existing home rose to $358,000, which represents a 15.8% increase over the previous year according to the NAR. Until more inventory hits the residential real estate market, we can expect house prices to remain high.
Whenever there is a situation where demand greatly exceeds supply, prices are likely to be high. And due to a lack of competition, there’s no reason for today’s sellers to be motivated to lower prices.
Will February be a good month to buy a house?
Probably not. Due to the above challenges, everyday buyers and real estate investors may be struggling with limited inventory and inflated real estate prices. And with mortgage rates rising, buyers actually have less incentive to rush to own residential real estate right now.
It could, however, end up being a good thing for the market. If buyer demand begins to decline, home prices could begin to decline as the year progresses.
Yet the current circumstances are difficult for real estate investors in particular who wish to acquire income properties to capitalize on the current boom in rental demand. The same goes for those hoping to add another vacation rental to their portfolio in time for the summer rush. All told, investors and repeat buyers will have to make a tough choice this month: pay a premium for an existing home without a ton of mortgage savings to offset the price hike, or put their plans on hold and hope the market conditions become more favourable. as 2022 moves forward.
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