The housing market in the East Bay is tighter right now than it was heading into the hypercompetitive 2021 spring housing market. Unfortunately for home buyers, more heartache, not relief, is the …
The housing market in the East Bay is tighter right now than it was heading into the hypercompetitive 2021 spring housing market. Unfortunately for home buyers, more heartache, not relief, is the projection for 2022.
As the 2021 market came to a conclusion last year, industry insiders hoped inventory levels would begin to rise. Through the summer and fall, inventory did finally tick up a bit. While the number of homes listed for sale did rise, it hasn’t been enough to make the market friendly for home buyers.
Mortgage rates are climbing as well, creating yet another barrier in purchasing a home. Currently, the average 30-year fixed mortgage rate is 3.62%, up from 2.65% in January 2021.
Renee Welchman of the Welchman Real Estate Group at Keller Williams doesn’t even think the traditional ‘spring market’ exists right now.
“The idea of a spring market went out the door with Covid-19. There is and will continue to be a scarcity in available homes on the market — I believe even more so than last year, which means if you are positioned properly with little competition, you will sell, regardless of snow on the ground or not.
“I think sellers and buyers need to re-align their thinking and stop looking for historical facts and figures to predict the market fluctuations and impending ‘drop’. We have been in a wild-west situation, as we enter year three of the pandemic. There is no history for what we are experiencing,” she said.
Often sellers are fielding offers with highest and best terms, which do not include waiting on the sale of a buyer’s home, and in some cases, sight unseen. Home sale contingency offers are not impossible, but sellers need to be positioned properly before entering into the buyers’ market.
“In the high-end markets, cash still seems to be king, as I am seeing experienced agents putting in over-asking, cash non-contingent offers, effectively raising prices more as we move along. The interest rates seem to have little effect on the high-end markets at this time,” Welchman said.
Mid-range market is stressed
At lower levels of the market, the same forces remain — low inventory and high demand. Add in rising interest rates, topping out at the highest they have been in two years, and buyers are more desperate than ever to secure the “American Dream” before their buying power drops.
Across all market segments, houses that are perceived to be “move-in condition” are yielding premium prices due to a lack of available contractors, the soaring price of materials and supply chain issues due to Covid-19.
Janet Bausch, of NorthPoint Mortgage in East Providence, said the real estate market is like none she has seen in her long career.
“It’s a mad, mad world, especially if you are hoping to purchase a home in 2022. It may feel like winter, but the spring market is already upon us. In fact, it arrived in 2021 and never left. One full month into 2022, we’ve already seen some market volatility. As we look ahead at the economy, it’s important to remain on course to achieve your goals over the long-term. We can’t predict, but we can plan,” Bausch said.
She said the outlook for 2022 should continue to be a strong real estate market for buyers and sellers. Rates had fallen to historical lows in 2021 and remained that way throughout the year. Inflation is on the rise, and the Federal Reserve is expected to have several rate hikes during the coming year. Rates increased in January in anticipation of these increases and growing inflation numbers.
Historically, home prices tend to remain stable as rates rise and typically help offset any increase in rates. In contrast to historic trends, with low inventory and high demand, expect more bidding wars.
“Your best defense is a good offense. If you are planning on selling, make sure you get a market analysis and know the average time on the market in your price range. You will want to know how much you will net from the sale of your home after all expenses are calculated, which will help you plan for a move. If you are buying, make sure you get a complete pre-approval. This will help prepare you for a bidding war,” Bausch said.
Buyer hoping to find a home
Dawn Keys has been renting a home in Portsmouth for many years and is looking to buy a home in Portsmouth, Tiverton or Bristol this spring. Her options are limited in her price range of about $300,000 — although in this market that is better price point than at other levels of the market, relatively speaking.
“I’m concerned about whether or not I will be able to buy. I am currently working on getting pre-approval, and some of the requirements are tough, as things happen in life that are not planned. The market is high and the reasonable houses sell quickly. I wouldn’t be looking to buy at this time, due to the unreasonable prices, however due to unforeseen circumstances I feel I have no other options. Rent is also at a higher rate and is unsustainable moving forward,” Keys said.
Deb Jobin of RE/MAX River’s Edge said the market in the area is tough on potential buyers.
“Inventory remains very low, making it difficult for buyers. Even with slight increases in mortgage rates the inventory remains low. The $300,000 price range attracts the most buyers. There are often lines of buyers at open houses. Many are making as many as 12 or so offers before they get one that is accepted. To make the offer more desirable, the buyers are opting out of inspections, which is risky for those not as familiar with potential home issues,” said Ms. Jobin.