November Housing Market Update 2022
As the 2022 housing market year reaches the end you likely have multiple questions on your mind. Should you buy or sell now or should you wait until next year? Will interest rates continue to rise or will they remain steady. And finally, will foreclosures become an issue any time soon?
In this addition of the monthly market report I will cover those questions and give you some local data on San Antonio’s housing market as well.
How the Fed fight against inflation is affecting mortgage rates
Len Kiefer, Deputy Chief Economist, Freddie Mac explains “U.S. 30-year fixed mortgage rates have increased 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in rates in over 50 years.”
For me this statement means two things. #1 inflation is a big threat and is being treated very seriously with that fast of a rate increase. #2 the fact that home purchases and home sale are continuing in this interest rate environment is a testament to the strength of the economy. If the Fed pivots away from rate increases watch out for an explosion of increased economic activity.
George Ratiu, manager of Economic Research at Realtor.com com explains ” With inflation still running at a 40- year high and the Fed expecting a few more rate increases to combat it, mortgage rates will experience upward pressure through the end of 2022.”
In that statement George is essentially calling an end of large rate increases and perhaps signaling that rate decreases may soon follow in the coming months. In fact just last week as of the date of this writing inflation data came in lower than expected. This encouraged stocks to rise higher in the hopes that a Fed policy change may soon be a reality. Only time will tell though.
What are mortgage rates projected to be in 2023?
When it comes to mortgage rate predictions Freddi Mac, Fannie Mae, Mortgage Bankers Association and The National Association of Realtors get plenty of press. The first quarter average prediction in 2023 of the four came out to 6.48%, the second quarter came in at 6.28% , the third quarter 6.15% and the fourth quarter came in at 5.98%.
So, more predictions that the Fed may be closing in on the end of rate hikes.
To further illustrate where we have been with rates and where we are likely going see the mortgage rate chart below.
Since 2016 interest rates have been steadily climbing and peaked at the end of 2018. Then of course took a nose dive in 2019 as the pandemic took hold. And now as the economy is fully open for business again the Fed induced tightening to avoid run away inflation.
Will foreclosures make a dent in the market?
The graph above shows distressed property sales and their market share from 2012 to present day ending in September 2022. As you will noticed we have steadily gone from over 30% market share in distressed sales (foreclosures, short-sales) to 2%.
Why is that? To understand the reasoning for such a low number of distressed sales. We have to look at banking standards.
In the above graph we are looking at the tightening of banking standards. The lower the green line the tighter the banking standards. In fact as we fast forward to the onset of the covid 19 pandemic, banking standards were tightened even more as a result of the uncertainty in the market.
The overall impression I get from this graph is that we have a lot of strong homeowners in their homes this time around. Leading up to the financial crisis on the other hand we had less sophisticated home owners. As a result we had a lot of distressed sales happening.
San Antonio Home Median Home Sales Price Update
Locally here in San Antonio the median sales price for a home is now at $300,750. This is down from a median price of $313,000 in June but has remained steady since August. Will this hold? Go up or come down more? Only time will tell. If we have positive appreciation in 2023 I wouldn’t expect double digit gains. If we go negative I would hope we stay in the single digit range.
San Antonio housing inventory
The good news home buyers can grab on to right now is inventory is up 27% year over year. So, there are more opportunity for home buyers to find a homeowner that is willing to negotiate after some time on the market.
Home owners on the other hand have some hard choices to make. Hold out for an over anxious buyer or cut the price to stay competitive, offer rate buy downs or both.
San Antonio New Home Listings
As far as new listings to the market San Antonio is only up 2.7% over last year. Yes, we have more inventory but I think the take away here is there does not seem like a rush to sell.
Bottom Line
If inflation shows more data that suggests it is easing interest rates may stabilize as expected by our experts. If inflation persists and begins climbing again we could see a larger rate increases and much more slowing in the housing market that could bring our local market into balance or even a buyers market.
If you’re thinking about a move let’s connect
Krishna Perkins