San Antonio Housing Market Update February 2022 | What You Need To Know
Inflation takes center stage on housing market
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Hey there, welcome to the February edition of the monthly market report for 2022. If you have been tuning in for a while, you know that I hit on all the values of the neighborhoods here in Northeast San Antonio, the inventory, in interest rates. But today I want to add inflation into the mix, as it’s a hot button topic affecting the housing market. You can’t go to really any news outlet without hearing about what inflation is doing.
I went to get gas the other day at H-E-B and I filled up for $2.99 a gallon, and by lunchtime the price had jumped up to $3.09. So, and it’s not even really travel season so it’s really in your face right now. What’s that gas going to look like during travel season?
Food Prices Up – What’s Next?
So that we’re not paying $20 for a hamburger Jerome Powell has basically said we’re going to attack this thing sooner rather than later. The original plan the Central Bank had in mind was to raise rates toward the latter part of the year. Unfortunately a 7.5% spike in inflation has moved that time table up.
So what should we be looking at to get a clue as to what the mortgage interest rates might be doing as a result of this action? We first have to understand the relationships involved. Her’es where the 10 year Treasury note comes in.
The 10 Year Treasury Note Skyrocketing
As you can see above the 10 year treasury note has been skyrocketing as investors flee riskier assets in search of safer places to invest their money.
How does this tell us what rates will do?
The Relationship Between 10 Year Notes And Mortgage Rates
As you can see from this graph above the 10-year notes and mortgage rates over the past 50 years have mirrored each other almost exactly. When 10-year notes fall, mortgage rates fall, and when 10-year notes rise, mortgage rates rise.
And right now the 10 year note is on the rise sharply.
Mortgage Rates Today
On this next slide which has quickly become outdated at the time of this writing with the recent spike in rates rates are at 3.55%. And then again climbed to 4 % on a 30 year fixed. And at least for the moment the Fed has not even officially raised their short term rates. So there’s really no telling how rates will react when that happens in March.
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But pivoting to some good news. Rates are still relatively low compared to what we have seen in the past. Yes they are climbing and yes some buyers are getting priced out because of the rise. However as you can see below they are still on the lower end.
Mortgage Rates Are Still Low But Climbing
Right now at the 3.55%-4% range mortgage rates still may entice buyers to take action. As you will notice here in this slide we are now at a 2010 level for rates. We have paid much more in the past for a mortgage.
No one can actually predict where rates will go in the future with 100% certainty. But many believe due to the amount of stimulus dollars in the market inflating consumer prices that higher rates are a certainty.
The take away here on mortgage rates is that while the rates have come up and expected to continue climbing. Rates are still on the lower end historically.
A potential benefit to buyers in a rising interest rate environment is that it may result in less bidding competition from other buyers as they get priced out of the market. And should the interest rates surge to higher than expected levels pricing may also come down and further benefit home buyers.
There’s really no benefit to home sellers in a rising interest rate environment unless the seller is also going to be a buyer looking to make a move with less competition.
San Antonio Housing Market Update
Now on to the San Antonio Housing market update. As you can see here the days on market is still dropping. Currently we are seeing homes spend less total time on the market before making it to the closing table. Right now we are at 38 days in 2022. We will see how this progresses through the year.
Only time will tell how market days react to the new rates environment and inflation concerns.
Housing Supply
And now for the metric everyone is watching, housing supply. This graph below represents San Antonio and is nearly identical to Bexar County in terms of supply. Right now our supply is at 1.3 months (if no other homes went on the market we would be out of homes in 1.3 months) and has been there since November.
Where this inventory level will adjust to is really anyone’s guess. On one had you have the possibility that buyers will gobble up the remaining inventory at a faster rate trying to beat any future rate increases. On the other hand we may see sellers bring their homes on the market to beat any cooling down of the market.
Bottom Line
Inflation and interest rates are the main stories of this month and will in my mind should make a noticeable impact on the housing market. To what degree is almost impossible to tell until we see the actual Central bank adjustments to short term rates.
Home buyers stand to experience drawbacks and benefits to higher rates while sellers seem to be at risk of losing the advantage they have enjoyed for two years.