Hello Home Hunters and Market Watchers! 👋
The U.S. housing market's journey in 2022 was less like a steady jog and more like a rollercoaster with the brakes slammed on. After two years of pandemic-fueled frenzy, the affordability wall finally arrived, forcing a dramatic cool-down. Here's a look at the data that defined the year, and what it meant for buyers and sellers.
💥 The Rate Hike Shock: Bye-Bye 3% Mortgage!
The story of 2022 is one of borrowing costs. The Federal Reserve's aggressive campaign to tame inflation sent mortgage rates soaring, instantly freezing out millions of potential buyers.
The Big Jump: According to data from Freddie Mac, the average 30-year fixed-rate mortgage rate, which had hit a record low of 2.65% in January 2021, began the year rising steeply. By late June 2022, rates had nearly doubled, pushing into the 5.81% range. They eventually shot above 6% in September for the first time since the 2008 financial crisis, creating a severe affordability shock.
💰 Peak Price Panic: The Record High and the Retreat
High rates met record prices, creating an insurmountable barrier for many. The rapid ascent to peak prices was followed by a necessary correction.
The Price Peak: The median existing-home sale price hit a record high of $413,800 in June 2022, according to the National Association of REALTORS® (NAR). This milestone was the culmination of 124 consecutive months of year-over-year price increases, the longest streak on record.
🧊 The Fastest-Cooling Markets
Where did the cool-down hit hardest? Not surprisingly, in the tech-heavy, pricey regions and the explosive pandemic boomtowns.
West Coast Chill: Markets on the West Coast, where prices were already astronomical, saw the sharpest slowdowns. Data from Redfin showed that Seattle, WA, and Las Vegas, NV, were among the fastest-cooling housing markets in the nation as of August 2022. These areas saw a sharp drop in homebuyer competition, forcing sellers to offer price cuts to move properties.
🔮 The Outlook: Sales Slump & Inventory Lock
As 2022 wrapped up, the forecasts for 2023 were centered on falling sales volume and lingering inventory issues.
Sales Forecast Slashed: Due to the persistence of high mortgage rates, Fannie Mae’s Economic and Strategic Research (ESR) Group severely downgraded its forecast for total home sales, anticipating a continued decline into 2023. The forecast highlighted the "lock-in effect," where existing homeowners, unwilling to trade their low rates for high new rates, would keep much-needed inventory off the market.
The market correction is expected to take time, leaving patient buyers with a small window of opportunity to negotiate as the frenzy subsides.