Could this be the year that people who have been contemplating selling finally decide it’s time? I have a feeling we will see a good number of sellers ‘cashing out’ in 2022 while prices and demand are high, and inventory and mortgage interest rates remain relatively low. Already this young year, we’ve seen a jump in interest rates, which has rung a few bells with industry professionals. There’s a possibility we may not see interest rates below 3% for a while, especially with the Fed looking to raise rates three times in 2022 to combat inflation.
When viewed in a historical context, interest rates right now look really good, in the low to mid 3’s. I’ve been reading that interest rates on 30-year fixed mortgages with good FICO scores will remain closer to 3.5% than 4% by the end of the year. Other mortgage professionals think rates will end up in the low 3’s, but nobody really knows for sure. The higher they go, the bigger the homebuyer hit. When purchasing a home, most buyers are stretching financially. On an $800,000 loan, the difference between where we dropped to last year at 2.75%, and where we are likely heading, to the 3.75%, is $439 per month. Consumers are going to feel that, especially with the prices of so many other goods going up. Gasoline prices in particular have been hurting consumers, both financially and psychologically. In this environment, home buyer expectations may be adjusting. Seller expectations should also take into account the reality of the situation.
The reality is that we have entered a period of rising interest rates due to the overheating of our economy. The whole idea behind cooling the market with higher rates is to slow things down. There is a good chance the housing market will slow a bit. Does that mean it will continue to increase in price, but at a decreasing rate? Does it mean prices will be flat, or even go down? Nothing I’ve read has said that prices are expected to go down. Most people are saying inventory will remain sparse and that will continue to drive prices up, just not as fast.
The most important thing to keep in mind as a homeowner who may be considering selling is that every micro-market in Marin is different. Each neighborhood has its own character, appeal, and pricing. It’s important to keep an eye on your market. Is inventory rising? What is selling? Are any houses sitting, and why? What are the average days on the market? How much are properties getting over-bid on average, and are we seeing anything getting under-bid? There are a lot of market dynamics to be aware of and consider.
I am currently working with a seller who is pushing to get his home on the market after meeting with his financial advisor. The financial advice was simple, sell sooner in the year than later. In fact, the sooner the better.