Clients, friends, and colleagues:
Sales were robust in Q1 for all property types, but the supply of house listings in particular was very low. However, as of March 31st, mortgage interest rates have skyrocketed 50% in 2022, with a particularly large jump in March. Because of the time involved in the home-buying process - the search, loan qualification, going into contract, escrow, closing sale - any significant effects of the recent spike won't show up until Q2. Rates may stabilize, rise further, or drop back down - they can change very quickly - and the exact, follow-on effects are unknown. Interest rates are only 1 factor: Local economic conditions, financial markets, wealth creation, housing affordability, consumer confidence, inflation, migration, the pandemic, rents, debt and government policies can all have big market impacts, and they are flashing both positive and negative signals.
For buyers financing their purchase, interest rates play an enormous role in monthly housing costs. Depending on the speed and scale of changes, declining interest rates can help supercharge demand, as they did in 2021, while rapidly Increasing rates typically cool the market, as occurred In the 2nd half of 2018. If both interest rates and home prices soar, there is a double whammy on housing affordability. It is very difficult to accurately predict interest rate changes: 3 months ago, Freddie Mac predicted an average, 30-year, fixed rate of 3.6% for 2022; at the end of March, it hit 4.67%.
When we speak of "low inventory," it does not necessarily mean fewer homes put up for sale. Sales volumes hit multi-year highs in 2021, fed by an increase in new listings. But "inventory" is measured by what is for sale on a given day, and even If the quantity of new listings is steady or climbing, the number of active listings can drop If they are selling more quickly. Within the city, supply and market dynamics vary significantly between houses and condos (including co-ops/TICs in this category).
This report contains analyses reviewing many of these issues through 01 2022. t1.2 is typically the highest-demand, most active selling season of the year.
For any questions about specific sectors of the market, please reach out to me directly.
