Home valuations have soared, is now the right time to buy or sell a home?

For potential homeowners, the previous year has been a roller coaster, but reports suggest that the real estate market in 2022 will be much more competitive.

According to Redfin and Zillow, the number of new listings is at an all-time low. According to Zillow’s December 2021 Market Report, there were 19.5 percent fewer properties listed at the end of 2021 than at the end of 2020, and 40.5 percent less homes offered for sale than at the end of 2019.

As a result, prices are rising much faster than they were last year: According to Redfin, the typical house sale price increased 14 percent year over year during the four weeks ended January 16th, reaching $358,500.

Homes were snatched up hours after going on the market last year, often for far more than the asking price. According to Jeff Tucker, Senior Economist at Zillow, the record-low inventory is projected to persist this year, at least through the spring season.

“It’s extraordinary,” says Tucker of the prices and demands.

The record-low supply is due to a combination of factors, including months of low loan rates and labor and material shortages that limit the ability to build new homes. Plus, according to Tucker, more people who currently own homes are taking advantage of the low borrowing rates to buy a second home without selling their first, instead deciding to take advantage of the low interest rates and become landlords.

However, when mortgage rates continue to increase — the 30-year fixed rate surpassed 3.5 percent for the first time since spring 2020 earlier this month — demand may begin to cool slightly. This is especially true for those who are searching for an investment rather than a place to live.

While there may be less competition in general, hefty price rises and rising mortgage rates are likely to leave many first-time buyers on the fence. According to Tucker, switching from a 3% to a 3.5 percent interest rate raises a monthly mortgage payment by 7%.

“Rising interest rates shrink budgets,” he explains. “For first-time buyers, this is a very difficult market for them,”

Though construction is beginning to ramp up, which will boost supply, demand must still be met despite decades of underbuilding across the United States.

According to Tucker, this suggests that sellers will continue to have the upper hand for the foreseeable future.

“Some buyers will be knocked out of the running this spring by high mortgage rates,” he anticipates.

National vs Regional Markets

As the Federal Reserve prepares to reduce quantitative easing and raise rates to fight inflation, this may spell doom and gloom for the national real estate market. However, it’s important to recognize growth opportunities in specific regions.

According to Zillow, Raleigh’s housing market ranks No. 3 in the nation. Zillow predicts the city will jump to the No. 2 spot by the end of the year.

Raleigh is in the Top 10 based on several projections:

  • Home-value growth
  • Strong job market
  • Fast-moving inventory

According to the Triangle Multiple Listing Service, a home only stays on the market for four days on average in December. A balanced housing market has a six-month supply of properties. However, the Triangle only has 0.6 of a month’s supply as of last month.

“At least 63 people relocate here every day, and this is due to the significant growth we’ve experienced in recent years. Home prices have increased in ways that no one could have predicted. In certain neighborhoods, properties that sold for $200,000 two years ago are now selling for $300,000. Be prepared to pay more than the asking price,” said Kristen Spruill, Director of New Development Sales at POCKETLISTING.

“If customers are able to buy today, we encourage them to do so. If you get in now while you can, your valuation will skyrocket. The house you’re looking at this year will cost at least $50,000 higher the following year,” Spruill said. “Most properties sell for more than their asking price, so $250,000 is simply a starting point. If you’re serious about buying a house and your approval is $250,000, you should look at $200,000 to give yourself some wiggle room to craft a winning offer.”

So is this the right time to buy ahead of rising rates and historically high housing valuations? In select markets such as Raleigh-Durham, absolutely, as growth will outpace the negative impact of economic policy employed to cool down the economy. Zillow anticipates home values will rise nearly 24 percent by November 2022.

Charlotte ranks No. 5 in the rankings, Tampa comes in at No. 1, ahead of another Florida city at No. 2, Jacksonville.

If you are in the market to buy a home in the Raleigh-Durham, Miami, or DC market, learn more about how you can earn 1.5% cash back.

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