Housing Market Changes in 2022
Did the National Housing Market Peak in 2022?
First, it is very likely that the national housing market has peaked. Most markets have hit their all-time highs this June and have begun to come down every month since then. Typically, the housing market is seasonal, and prices generally peak in the summer. However, this time around the housing market began peaking earlier than normal due to a correction that began late last year.
Historically, the housing market is often measured in year-over-year terms (i.e., what happened in June 2022 vs. June 2021.) When we observe the national housing market in this manner, it is still up around 6 percent year-over-year. That would be seen as rapid appreciation in a typical year, but this represents a huge decrease from the growth rates we have seen over the recent years. As an example, a few months ago, in May 2022, appreciation year-over-year was over 15%!
Opportunity for Individual Markets 2022
The previous paragraph may not be easy to hear for some, but it does not matter in a sense. If you focus on the national housing market, you might miss the lack of similarity between individual markets. Some markets have barely changed and continue to look like a strong sellers market. Others have drastically shifted towards a buyers market.
In order to measure this, we can look at two indicators for housing prices: (DOM) days on market and inventory. When one of these indicators is low, it is an indication of a sellers market. If they are high, it is an indication of a buyers market.
If you take a look at the chart below, you can see that inventory remains extremely low in a historical sense and has not increased, indicating the metro area is still in a sellers market.
Many other cities (in the midwest and northeast mainly) look this way. Boston, Massachusetts; Chicago, Illinois; Hartford, Connecticut; Cincinnati, Ohio; Madison, Wisconsin; and many others still seeing pandemic-level inventories.
If you would like to do some research on your own market, you can take a look at Redfin's tool.
In regard to this data, it is important to remember that we are only looking at the current data and not what the future has in store. To understand the future of the housing market, we need to understand population growth, supply and demand, and job/wage growth which is not an easy thing to accomplish.
Many markets that are seeing the corrections still have long-term opportunities. As an example, we can look at Austin, which grew quickly over the last several years. The city still shows no signs of slowing down and has enormous economic/population growth. In comparison, some markets like Chicago have slowed down and seem more stable.
What Will Happen to Housing Market Prices?
In conclusion, we might see housing prices decrease over the coming months. Rising interest rates have reduced affordability. In addition to recent events, including inflation, interest rates will continue to rise. As a result, housing prices will most likely decrease.
Still, the likelihood of seeing a "crash" is slim because of several reasons like long-term supply shortages, better lending practices, and a decline in new listings.
People don't seem to want to sell their houses right now. As opposed to the stock market, when homeowners are faced with selling their homes in an unfavorable market, they rather not take the risk. Additionally, with more than half of Americans with mortgage rates under 4 percent, it wouldn't make sense to sell their home and have to buy a new one with higher interest rates. In conclusion, the data suggest that a market crash is highly unlikely, even when a market correction is underway.
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