Last Updated on April 1, 2022 by Luke Feldbrugge
Welcome to another Housing Market Trends monthly update from Homes for Heroes. This report focuses on the residential real estate housing market and we attempt to provide useful information to assist our heroes with decision making regarding buying and selling a home, or refinancing their mortgage.
BULLETS: Housing Market Trends April 2022
- There continues to be more home buyers attempting to buy a house then there are homes available to purchase.
- Due to the law of supply and demand, the lack of homes to buy continues to cause home prices to rise as buyers continue to battle hard and often for the home(s) they want.
- Rest Easy: Data supports there is not a “housing bubble” so it will not burst like it did in 2008.
- Sellers Market: On average, home prices have increased 54.5 percent in the past 5 years. So on average, if you bought a home in 2016 for $200,000 you could sell it today for $309,000!
- It’s Worth the Fight: Buying a home is tough right now, but it’s still one of the best investments to increase your net worth.
No Secret: It’s a Sellers Market
If you’re shopping for a home and hoping to read it will get easier soon, I hate to say it, but that’s not likely. If you want to start looking for a home to get in on a lower interest rate, strap in tight and pump yourself up a good challenge my friend. There is no indication of much relief coming soon.
But, the data shows 2021 hit a 15-year record for the number of people who purchased a home! So, don’t lose hope. There is a home out there for you. But, you will likely need to work harder than the other buyers, and offer a little more than the other buyers to get that accepted purchase agreement on the home you want.
Now, if you want to sell a home, you’re loving it right now! Especially if you do not need to purchase another home right away. You could put your home on the market today and likely have multiple offers in the first 48 hrs. And if your home is desired by multiple buyers, those offers will likely be above your asking price and they’ll probably forgo some or all contingencies. It’s good to be a seller right now.
Housing Market Trends are Tough Right Now
It’s because of supply and demand. Because home mortgage interest rates are still historically low, there are more home buyers than homes available to purchase. This continues to cause home price increases. Prices will not come down until more homes are put up for sale, or home buyers throw up their arms and exit the market. There are not many signs of a dramatic increase of homes for sale, and that’s why home price appreciation continues to accelerate. The graph below shows how prices continue to climb and all the models are saying 2022 will experience a six percent home price appreciation.
Some experts believe this spring we will see more home sellers enter the market, and more new construction to help ease the price increases with more available inventory. But, that will merely slow the price increases as experts are projecting home prices to continue rising.
Should I be Worried About a Housing Bubble?
No. We understand there are many possible reasons why you may be concerned, but major contributors to the crash in 2008 are not present in today’s market. This housing market is NOT a housing bubble. The market conditions are completely different. But, that doesn’t mean people are not a little freaked out by these insane home prices as you can see below. If you’re worried, you’re not alone. 3 out of 4 heroes are worried. Shoot, even nearly 1 out of 2 real estate agents are worried!
Please rest easy. Here are two major points of difference between the crash, and the market today.
Major Difference #1 – Existing Home Inventory
This comparison graph shows a month’s supply of existing homes for sale in December (end of year). Here’s the difference: The orange is a buyers market (crash) and the blue is today’s sellers market. This means there were far less buyers in 2008, and far greater inventory available to sell. Remember, 2021 set a 15-year record for the number of people who purchased a home.
Major Difference #2 – Home Loan Lender Approvals
Point blank, if you cannot afford to purchase a home or if your credit is lower than desired, a mortgage lender will not allow you to borrow money. This was not the case in 2008 and it was a major cause of the crash when many homeowners defaulted on their mortgages and homes went into foreclosure. This led to new federal regulations implemented to protect home buyers and the market from something like that happening again.
The graph below shows there were significantly more home loans issued to buyers who had a credit score less than 620, meaning they were at higher risk of defaulting on their mortgage.
Lending standards have tightened. It makes it more challenging to purchase a home. But, it should protect you from getting in over your head, and protect the market from a crash.
Homeownership is Key Driver to Net Worth
If you can afford to buy a home now, keep fighting to get one. Even in this crazy market. Interest rates are still historically low (although creeping up) and homes are likely to be more affordable now versus later in the year. Not to mention the biggest reason why buying a home is so beneficial.
- In 2001, the latest National Association of Realtors (NAR) report shows the average net worth of a homeowner was $300,000. The average net worth a renter was $8,000.
- Over time owning a home can increase your net worth.
If you purchased a home back in 1991 for $97,000, according to the Federal Housing Finance Agency (FHFA), that home in 2016 (25 years later) was worth $149,900 or a 54.5 percent increase in home value.
Now, consider this insanity. Due to the current market conditions over the past 5 years, that home according to the FHFA was worth roughly $250,200 in 2021. That’s an increase in home value of 258 percent!
This is why you need to keep fighting for that house you want if you can afford to do it right now.
Save Some Money with Homes for Heroes
If you’re a firefighter, EMS, law enforcement, active or veteran military member, healthcare professional or teacher and you’re gonna fight it out, we want to fight it out with you. Let our real estate and mortgage specialists in your area work with you to find the home you want during these crazy times. If you close on a home with your local Homes for Heroes specialists you can save an average of $2,400. Simply sign up today to learn more about how our specialists can assist and save you some money in the process.
