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March 2022 Monthly Market Update

The 2022 Shift Is Here

A Journey To How We Got Here

This Month we’re gonna talk about what’s happening in today’s market, but I’m gonna take you on a little bit of a journey to show you how we got to where we are right now.

Home appreciation from 2006 to 2011, averaged a negative 4.5%. We come out of the great recession from 2012 to 2019 home appreciation averages, a positive. And then we get into 2020. The pandemic hits us and a lot of us were wondering what’s gonna happen to the housing market. Well, astonishingly, what we saw is the last two years, home prices have appreciated by 11.67%, actually in 2021 nationwide home prices appreciated by about 17%, which was the highest rate ever on record. Now what caused this? Well, there’s a couple things that happened. So when the great recession hit builders stopped building houses. Matter of fact, many builders actually went of business. So new construction came to a standstill and there were a shortage of houses that were being built, combined that with investors because of low interest rates, investors snapped up properties to become rentals at an astonishing pace.

As a matter of fact, in the fourth quarter of 2021, investors bought about 20% of the inventory that was available nationwide. So you have a shortage of houses that are being built from builders. You have investors that are buying properties to turn into long term rentals, due to low interest rates and then we have baby boomers. So look at it from a, a generational standpoint, the baby boomer generation controls about 65% of the real estate nationwide. Many baby boomers decided not to move, or maybe they bought the house. That’s gonna be there forever home. So those houses are not coming on the market the whole time. We’ve had extremely low, low interest rates. As a matter of fact, in 1980, the average interest rate for a 30 year fixed rate mortgage was 17.5%. So we have a shortage of supply combined with the millennial generation or going into their peak home buying years.

So not only do we have a supply shortage, but now have an increase in demand. Those two factors alone have caused home values to appreciate at an unprecedented rate. So what does that mean for us today? Well, interest rates have been in a downward trend for 20 years. We’re now starting to see this and we could be at the end of a major macro interest rate cycle. Is it possible that we see rates creep back up? We’ve already seen it just in the last 90 to 120 days. What is that going to do? Well, if home price appreciation continues in this direction, housing becomes unaffordable. If interest rates go in that direction, the cost of housing becomes unaffordable for a lot of people that this year could cause a shift, but one of two things will most likely happen this year. We’re gonna see a low tapering off of values, or we’re gonna see values, continue to climb, but ultimately everything has to come back to the norm

Ultimately, we can’t have runaway home price appreciation. What we’re hoping for right now is a leveling off, and maybe we stay flat for a couple years if we don’t see a leveling off. And we see the, the rapid appreciation that we’ve seen, we could see a more dramatic shift. So what does that mean to you? Well, if you’re thinking about buying a house now is a great time to lock in a great interest rate. I don’t think we’ll ever come back to the low or high to the mid or high to interest rates again. So if you’re thinking about buying a house now is a great time to lock in that rate. If you’re on the bubble about selling, what is your time horizon? Do you need to sell right now? Or if you have a zero to five year time horizon now, maybe a good time because we don’t know when this shift is going to happen. And is it gonna be a, a slow down or is it gonna be a monumental drop off? What of the, the two are going to happen? We don’t know exactly when, but it’s going to be in the next zero to five years.

So if your time horizon for owning that property, and let’s say that you have a rental property and it’s cash well for you for years, but you know that you’re gonna need to unload that rental property sometime in the next zero to five years. You may want to consider selling that now. So once again, if you’re thinking about selling, please reach out to one of our analysts and we’ll do a free equity analysis for you. That equity analysis will show you exactly how much money you can walk away with and where you can deploy that at capital to get a higher return on investment. If you’re thinking about buying a house, please reach out to one of our agents lock in that interest rate today and move forward to the house you dreams.

Claim Your A FREE Equity Analysis

So if your time horizon for owning that property, and let’s say that you have a rental property and it’s cash well for you for years, but you know that you’re gonna need to unload that rental property sometime in the next zero to five years. You may want to consider selling that now. So once again, if you’re thinking about selling, please reach out to one of our analysts and we’ll do a free equity analysis for you. That equity analysis will show you exactly how much money you can walk away with and where you can deploy that at capital to get a higher return on investment. If you’re thinking about buying a house, please reach out to one of our agents lock in that interest rate today and move forward to the house you dreams.

John Newman

Founder & CEO of The Newman Group

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