To say that it has been an eventful year would be quite the understatement. 2022 was turbulent from the very first days of January, with the good, the bad, and the ugly, all taking center stage at one point, or another, and doing so with biting polarity. It was, predictably, a pretty rough landing coming out of a surreal pandemic.
The year began with consumer enthusiasm marching defiantly through the first two quarters of 2022, even as inflationary embers began to spark. Activity in the Real Estate market was downright unbelievable at times, much to the delight of sellers and dismay of buyers. Home prices peaked in May, right in-synch with gas prices that easily topped $6 a gallon. It was painfully clear at this point that a culmination of factors including (but not limited to) a European war, energy shortages, global supply chain failures, and rampant consumer spending, had set inflation ablaze. By late Spring, the Federal Reserve Board had seen enough and acted swiftly, aggressively raising interest rates and sending equity markets into a tailspin. Mortgage rates climbed over 7% by late October, further thwarting buying power and stopping many buyers in their tracks.
By Summer, home sales and prices began to stall, and by the Fall, the buyers that remained in the market suddenly found themselves with more control of the process. For the first time in years, contracts were being executed below list prices, and with more buyer protection. While prices have only dropped 2-5% across several categories, the real telltale has been sales volume, which is down over 30% year over year for homes above $2 million and around 40% for homes above $5 million. The market has not plummeted, but it has been teetering even with extremely low inventory levels, and a healthy number of buyers remaining active.
But, alas, there is some light at the end of the 2022 tunnel. Recent indicators show that inflation has slowed, and while the Fed has hinted that interest rate increases will continue, the hope is that they may not need to be as heavy-handed moving forward. Those buyers that remain committed are at peace with higher loan payments now, knowing they will refinance down the line, and sellers are still finding good results as long as they have a fundamentally strong offering and realistic price expectations.
It is welcome news as we head towards 2023. In the end, I think we can all agree that moderation is just fine, thank you, and we will happily leave the extremes in the rear view mirror.
The year began with consumer enthusiasm marching defiantly through the first two quarters of 2022, even as inflationary embers began to spark. Activity in the Real Estate market was downright unbelievable at times, much to the delight of sellers and dismay of buyers. Home prices peaked in May, right in-synch with gas prices that easily topped $6 a gallon. It was painfully clear at this point that a culmination of factors including (but not limited to) a European war, energy shortages, global supply chain failures, and rampant consumer spending, had set inflation ablaze. By late Spring, the Federal Reserve Board had seen enough and acted swiftly, aggressively raising interest rates and sending equity markets into a tailspin. Mortgage rates climbed over 7% by late October, further thwarting buying power and stopping many buyers in their tracks.
By Summer, home sales and prices began to stall, and by the Fall, the buyers that remained in the market suddenly found themselves with more control of the process. For the first time in years, contracts were being executed below list prices, and with more buyer protection. While prices have only dropped 2-5% across several categories, the real telltale has been sales volume, which is down over 30% year over year for homes above $2 million and around 40% for homes above $5 million. The market has not plummeted, but it has been teetering even with extremely low inventory levels, and a healthy number of buyers remaining active.
But, alas, there is some light at the end of the 2022 tunnel. Recent indicators show that inflation has slowed, and while the Fed has hinted that interest rate increases will continue, the hope is that they may not need to be as heavy-handed moving forward. Those buyers that remain committed are at peace with higher loan payments now, knowing they will refinance down the line, and sellers are still finding good results as long as they have a fundamentally strong offering and realistic price expectations.
It is welcome news as we head towards 2023. In the end, I think we can all agree that moderation is just fine, thank you, and we will happily leave the extremes in the rear view mirror.
Cheers to 2023!
Jon
Jon
