The biggest story of the quarter was a long-awaited rise in interest rates. It felt like we had been talking about “historically-low” interest rates for almost 20 years, as they started a slow and stubborn decline in the early 2000s that took them from about 7% (which at the time was a historic low) all the way through to under 3% during the Pandemic Market. Year after year, we kept expecting that they might start to go up, only to see them continually go down.
Well, all that ended in the first quarter of 2022, with interest rates surging, largely because of a red-hot economy driving a spike in inflation. The average interest rate throughout 2021 was 2.96%, but by the end of the first quarter, rates had risen up to over 4.5%, with legitimate concerns that they might continue to go up throughout the year. This increase might be giving some buyers “sticker shock,” but let’s try to have a longer-term view on just how low rates remain from a historical perspective.
– Joe Rand CCO at Howard Hanna | Rand Realty
What’s Going on in the Market?
So how have these rising interest rates impacted the housing market? Well, remember that most of the deals that closed in the first quarter were put into contract, and perhaps locked into an interest rate, before the surge in rates. Accordingly, we’re not going to see much of an impact in the closed transactions. Even in the pending contracts, many of the deals reported during the quarter got into contract before the spike in rates.
What about the market for the rest of the year? We believe that those rising interest rates will not have much of an impact on sales or prices, at least through the summer. Why? Because inventory is just so low. Sales and Pending Contracts are down, but that’s largely because we can only sell what’s for sale – and we don’t have enough homes on the market. And we still have enormously strong buyer demand. Even with rates going up, buyers generally will adapt by opting for those adjustable-rate mortgages or putting more down. So with demand high and inventory low, we believe that prices will continue to go up, at least through the end of the year. We doubt that we will continue to see double-digit appreciation for another year, but we simply see too much demand and too little supply to think prices will flatten out anytime soon.
Five Takeways for the First Quarter of 2022:
1. Sales were down from last year, but largely because of the lack of homes to sell.
2. New pending contracts cooled down after a torrid streak.
3. Prices continued to rise dramatically, reaching new historic highs.
4. Listings are down, keeping inventory at historic lows.
5. Sellers continue to enjoy negotiating leverage over buyers
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About Howard Hanna | Rand Realty: Howard Hanna Rand Realty has more than 1,100 residential real estate sales associates serving New York, New Jersey, and Connecticut suburbs of New York City. Its 30 offices serve Bergen County, Passaic County, Hudson County, Morris County, Essex County and Union County in New Jersey, Westchester County, Rockland County, Orange County, Sullivan County, Dutchess County, Ulster County, and the Bronx in New York, and Fairfield County in Connecticut. Rand also owns and operates Rand Commercial, a commercial real estate brokerage, and Hudson United Home Services, which provides residential mortgage lending, title services, and personal and commercial insurance. For more information, visit https://randrealty.com.
About Howard Hanna: Howard Hanna Real Estate Services is the #1 family-owned and -operated broker in the U.S.A. The full-service real estate company has nearly 400 real estate, mortgage, insurance, title, and escrow service offices across 13 states, including Allen Tate Realtors® in the Carolinas and The F.C. Tucker Company in Indiana, with more than 13,000 sales associates and staff, including many of the industry’s top-producing real estate agents. For more information, visit www.HowardHanna.com.