Let’s Talk Real Estate – September 2022
Say goodbye to the days of a “sellers’ market” and hello to a new, more balanced real estate market. 2022 has been quite the year; the US gross domestic product contracted in the first and second quarters, the stock market has been tumbling, inflation is stubbornly high, the Federal Reserve continues to raise interest rates and pending home sales have fallen for seven straight months.
If you look at this year compared to last year you can clearly see what a difference the year has made in the Jackson County real estate market. Many significant indicators have changed and show a new direction. The number of homes selling has declined, inventory of homes for sale has increased, there has been a decline in the growth rate of home prices, days on the market have increased, interest rates have increased, and there has been a decline in stock market values. Let’s look at the numbers:
Homes Sold—May 1st through July 31st, 2021, there were 1,107 homes sold, whereas the same time-period in 2022 there were 969 sold. Still a robust amount, but a 12.5% decline.
Inventory—In July of 2021 there were 445 homes for sale, compared to 909 in 2022, so inventory has more than doubled which is good news for buyers as there is finally more choices and less bidding wars.
Home Prices—In July of 2021 home prices for existing homes were up 21% from the previous year, compared to a 10.2% increase in July of 2022. The interesting news is the median price of a home is still increasing, but the rate of increase has declined to about one half of the increase we saw this time last year. These soaring prices are making affordability hard for many buyers, especially first-time home buyers.
Days on the Market—You can measure the heating or cooling of a market by measuring how long homes are taking to sell. In July of 2021, the average home was selling in 19 days and this July it was taking 28 days, so the time it takes to sell a home is increasing.
Interest Rates—In Jackson County, home prices have increased over 50%, but mortgage payments were still low due to the incredibly low interest rates. That has all changed as we have seen interest rates go from as low as 3% last July to the current average rate of over 5.5%. This is the largest contributor to declining home sales. Many first-time home buyers can no longer afford a home with our median home price at $420,000, then add to that, interest on a mortgage that has almost doubled. You will pay about $1,700 a month on a $400,000 mortgage at 3% interest and about $2,300 month on a $400,000 mortgage with a 5.5% rate. So, with today you will pay $600 more a month than you would for the same $400,000 mortgage a year ago. Buyers are paying more to buy a home this year and more to finance that home. Homeowners are reluctant to get rid of their current low interest mortgage so less are deciding to “Move-Up.”
Decline in the Stock-Market—Our market has always been influenced by “Retirees” moving into our area. They can retire because they have built-up equity in their homes and they have built up a substantial 401K. With the stock market tumbling many of today’s retirees are going to choose to work longer and build back their 401K’s before they are ready to retire.
The Times They Are A-Changin’ and most likely the current changes will continue in the same direction, meaning declining home sales and increased number of homes for sale that take longer to sell. How long will this last? Our economy is complicated, but our opinion is we will need to curb inflation, see interest rates decrease, and the stock market stabilize before the current direction of our market changes.