By SARAH WARD
Home prices are leveling currently after an incredible multi-year run up. But the question now becomes whether this is a temporary slowdown to be followed by additional home price appreciation in 2022 or if this could be the top with a potential drop in prices next year.
I read many real estate blogs, articles, and analysis. For example, CoreLogic is a widely read quantitative forecast of residential real estate trends. First I can say that there is a slight drop-off in active buyers currently. Some buyers, after submitting many offers all year, are taking a break from the home search. At the local Realtor meeting, other agents are remarking that instead of the usual 20 to 30 offers on a property, agents are receiving maybe four to 10 offers now.
Home prices were rising over the summer of 2021 faster than they had for many years for an assortment of factors: low inventory of homes available, historically low mortgage rates, and the infusion of millennials and tech workers into the housing market. An additional factor is of course that the pandemic resulted in many renters to seek more square footage by leaving an apartment and moving into a purchased home, especially in the College Area, Del Cerro and all of East County.
Many real estate economists forecast that price increases will be less next year. There is an affordability ceiling that many are hitting and further price increases will drop many buyers out of the market. Another issue is that with the strong inflation occurring currently, interest rates are expected to increase which will obviously increase mortgage payments and further reduce affordability and reduce demand at these prices. Many buyers just don’t have the income to afford higher mortgage payments and property taxes from here on out.
So, being an active reader of real estate pricing trends, I predict a flattening of real estate prices in 2022. While interest rates are still low, there is no denying there is an inflation effect underway and a rise in interest rates is sure to follow. A one or two percent increase in mortgage rates will likely throw some cold water on the euphoria because of the significant rise in mortgage payments and reduction in affordability.
I predict the strong seller’s market to continue next year but with only modest price increases or even possibly a slight downtick in prices. Forecasting is difficult but that is what the data is telling me. Stay tuned to my articles.
Call me for a no-obligation chat or meet-up to discuss your options going forward on buying or selling residential property in 2022. 858-431-6043
MARKET REPORT (single family)
92115 College Area: The median November home price dropped 7% from October to $814,125 and the number of pending sales increased by 9%.
92119 San Carlos: The median November sales price dropped 5% from October to an adjusted amount of $880,000 and the closed sales increased 50% to 24 closings.
92120 Allied Gardens, Del Cerro: The median home price for November plunged 17% from October to $935,000 and the number of closed sales was up 20% to 12 closings.
— Sarah Ward is a realtor with Fine & Coastal Real Estate.