The housing market is at a turning point, and if you’re thinking of buying or selling a home, that may leave you wondering: is it still a good time to buy a home? Should I make a move this year? To help answer those questions, let’s turn to the experts for projections on what the second half of the year holds for residential real estate.
Where Mortgage Rates Will Go Depends on Inflation
While one of the big questions on all buyers’ minds is where will mortgage rates go in the months ahead, no one has a crystal ball to know exactly what’ll happen in the future. What housing market experts know for sure is that the record-low mortgage rates during the pandemic were an outlier, not the norm.
This year, rates have climbed over 2% due to the Federal Reserve’s response to rising inflation. If inflation continues to rise, it’s likely that mortgage rates will respond. Greg McBride, Chief Financial Analyst at Bankrate, explains it well:
“Until inflation peaks, mortgage rates won’t either. Without improvement on the inflation front, we don’t know where the interest rate ceiling will be.”
Whether you’re buying your first home or selling your current house to make a move, today’s mortgage rate is an important factor to consider. When rates rise, they impact affordability and your purchasing power. That’s why it’s crucial to work with a team of professionals, so you have expert advice to help you make an informed decision about your best move.
The Supply of Homes for Sale Projected To Continue Increasing
This year, particularly this spring, the number of homes for sale has grown. That’s partly due to more homeowners listing their houses, but also because higher mortgage rates have helped ease the intensity of buyer demand. Moderating buyer demand slows down the pace of home sales, which in turn helps inventory rise.
With interest rates rising, buyers pressing the pause button, and inventory going up. What does this mean for Martha's Vineyard real estate market?
Experts say that growth will continue. Recently, realtor.com updated their 2022 inventory forecast. In the latest release, they increased their projections for inventory gains dramatically, going from a 0.3% increase at the beginning of the year to a 15.0% jump by the end of 2022 (see graph below):
More homes to choose from is great news if you’re craving more options for your home search – just know that there isn’t a sudden surplus of inventory on the horizon. Housing supply is still low, so you’ll need to partner with an agent to stay on top of what’s available in your market and move fast when you find the one. It’s not going to be easy to find a home, but it certainly won’t be as difficult as it has been over the past two years.
Home Price Forecasts Call for Ongoing Appreciation
Due to the imbalance between the number of homes for sale and the number of buyers looking to make a purchase, the pandemic led to record-breaking increases in home prices. According to CoreLogic, homes appreciated by 15% in 2021, and they’ve continued to rise this year.
Even though housing supply is increasing today, there are still more buyers than there are homes for sale, and that’s maintaining the upward pressure on home prices. That’s why experts are not calling for prices to decline, rather they’re forecasting they’ll continue to climb, just at a more moderate pace this year. On average, homes are projected to appreciate by about 8.5% in 2022 (see graph below):
“The current home price growth rate is unsustainable, and higher mortgage rates coupled with more inventory will lead to slower home price growth but unlikely declines in home prices.”
For current homeowners looking to sell, know your home’s value isn’t projected to fall, but waiting to make your purchase does mean your next home could cost more as home prices continue to appreciate. That’s why, if you’re thinking about buying your first home or you’re ready to make a move, it may make sense to do so now before prices climb higher. But rest assured, once you buy a home, that price appreciation will help grow the value of your investment.
Martha's Vineyard Real Estate Forecast
At The O'Hanlon Group, we looked to the past to gain a better perspective of the current situation; as Jen O'Hanlon explains it:
“I've been holding off on speaking about what is happening in the real estate market because I wanted a little more time to see what was happening. I needed more data before putting my opinion out there."
The first 1/2 of 2022 is behind us, and now we can provide some information. We are focusing on Martha's Vineyard right now. Obviously, we need to pay attention to what other markets are doing, but we are often affected differently and less dramatically than other geographical locations.
Are sales declining on Martha's Vineyard? Yes, take a look at stats from LINK MV, the Island's MLS, below.
Compared to the same 6 months last year, we are down about 45%. Our market was very busy the first few months of the year, so we think the reduction in sales then was due to the lack of inventory. As inventory slowly starts to creep up, we continue to see a decline in sales. So, that's what's important to look at. Speaking of inventory, in the stats above, we can see how that compares to more "normal" pre-pandemic times.
Pay attention to how inventory has changed over the last several years. In 2018, with 9 months of inventory then, it was considered a slight buyers market on Martha's Vineyard. 5-6 months of inventory indicates a balanced market, and under 5 months is a seller's market.
Guess how many months we currently have. LINK MV is showing 5 months of inventory. So I'd say buyers are getting back into a good position to be able to negotiate on the purchase of a home, and Martha's Vineyard sellers need to start thinking about pricing their homes in line with what comparable homes are selling for and not trying to test the market.
Whether you’re a home buyer or seller, you need to know what’s happening in the housing market, so you can make the most informed decision possible. Let’s connect to discuss your goals and what lies ahead, so you can determine the best plan for your move.