Many current homeowners check online home sites that offer a free estimate of value, imagining what it’d be like to sell in this market. However, the issue always comes back to where you’d move if you sold your home now – is there a viable option? While plenty of families have still taken this plunge, buying in the extended seller’s market of 2020 and 2021, others are wondering if a buyer’s market with more options and less competition is in sight. When you talk to leading real estate agents, unfortunately, the signs aren’t good for 2022 to become a full buyer’s market, though change is in the air.
Cooling Seller’s Market Due to Interest Rate Hike
The Federal Reserve has made it clear that interest rates are on the rise, working to cool some inflation concerns and keep the economy running smoothly. With higher interest rates, many people become more reluctant to buy versus keeping their current home or renting, which may reduce some of the intense competition that many markets have seen lately. While challenges of low inventory mean that some folks will still compete for high-demand areas, fewer overall shoppers can be a source of leverage for buyers.
Buyers May Tire of High Prices and Higher Interest Rates, Becoming More Willing to Walk Away
In addition to the high interest rates, remember that the extended length of this seller’s market has exhausted many people who are shopping but don’t absolutely have to find a home. In past cyclical markets, buyers would have a break eventually, with a higher-inventory period where homes were plentiful. The extended seller’s market, however, has resulted in a somewhat-new kind of buyer, the exhausted buyer, who is willing to make other arrangements (keep renting, stay in a non-ideal home, move in with family) if no affordable homes are available. This is likely to happen to the families that are placing offers and repeatedly losing out to cash offers or high-over-asking offers every time. The higher the percentage of buyers who are exhausted and unwilling to deal with the challenges, ironically, the less power the sellers have. If a seller overprices their home in 2022, there’s a higher chance than in past years that there simply won’t be a buyer willing to pay at that rate, forcing a little more leverage onto the side of any buyer who places an at-asking or under-asking offer.
Without Strong Inventory Boost, 2022 is Unlikely to Create a Buyer’s Market
While these factors do loosen the stronghold of sellers, the issue of inventory affects most of the markets in the states. Until supply chain issues with new construction are cleared up and there is a burst of new housing in the in-demand price ranges, it will be a slow process to get back to a buyer’s market and more typical cycles. If enough people have strong impulses to move, even high prices and high interest rates won’t stop them from submitting a competitive offer for a property that may have multiple offers already. That being said, the interest rates are a positive direction for reducing the rapid increase in bidding wars and other intense market activity, which may help sellers indirectly since they are less likely to see a deal fall through at the inspection or appraisal stages. Everyone benefits when the market comes back to a more balanced state.