I want to wish you a very Merry Christmas and hope that you are getting ready to have the best year ever in 2022! We dusted off the Michael Bublé Christmas album, have the house fully decorated, and took the kids to Stoker Farms to pick out the perfect tree.
(Felix 1.5 years old and Ana 2.5 years old - now picking out her own outfits ha!)
Real Estate News
It’s December! Wow, this year absolutely flew by. In my head, I still feel like its March 2020 and I’m not sure how long it will take me to get over that. However, the real estate market is not stuck in 2020 and I am bracing myself for a very fast paced Q1 and Q2 of 2022. The Federal Reserve is expected to start raising rates in Q4 (more on that later) and Fannie Mae predicts the national median home price to increase 11.5% for single-family homes in 2022 and a more normalized 3.7% increase in 2023. In the Puget Sound Region, we tend to outpace the national averages in just about every housing category, normal to us looks like a 9% price increase due to our local economy and limited supply. Nationally, the total number of homes for sale was down -12% from total number of listings last year. Down 12% is pretty decent if you compare that to King County’s total number of single-family homes which is down 60.7% from last year, Snohomish County (-42%), and my neighborhood in Lake Forest Park (-58.8%). With our crazy low inventory, we are building up a backlog of capable buyers. When more homes come on the market after the holiday season, it’s going to be very competitive.
- November Median Sales Price
- King County: $820,000 (+11.6% from November 2020)
- Snohomish County: $683,000 (+18.8%)
- Lake Forest Park/Kenmore/NE Shoreline: $824,500 (+11.6%)
- November Total Number of Homes for Sale
- King County: 694 (-60.7%)
- Snohomish County: 282 ( -42%)
- Lake Forest Park/Kenmore/NE Shoreline: 14 (-58.8%)
Why is Fannie Mae predicting the housing market to slow towards the end of 2022? Well, it has to do with the old invisible tax we call, inflation. Now inflation isn’t always a bad thing and real estate has been a tool to hedge against inflation. As a home price rises over time, it lowers the loan-to-value of any mortgage debt, acting as a natural discount. As a result, the equity on the property increases, but your fixed-rate mortgage payments remain the same. I asked my go-to Senior Loan Officer, PJ Mooney at CrossCountry Mortgage, to write up how the current inflation situation will impact the mortgage rates.
PJ’s Power Play – Inflation and the Federal Reserve
We all know the ongoing COVID story, in Spring 2020 the country entered its worst recession in history, but it was also the shortest-by far. Thanks to government stimulus to the tune of nearly $6 trillion and most American’s sitting at home, the demand for goods skyrocketed. Labor shortages and lockdowns put a hold on supply chains and prices started to rise, leading to the highest inflation rate in 30 years.
Inflation, when left unchecked, can escalate quickly. In a bid to stop the spiraling inflation of the 1970’s, The Fed cranked up interest rates to slow down the economy, an action that inevitably resulted in a punishing recession. The 1970’s inflation was a result from a disrupted energy market (an OPEC oil embargo and conflicts in the Middle East) that led to the longest stretch of inflation in US history.
While each inflationary period has its own unique characteristics, White House economists point to the current pent-up consumer demand and supply chain disruptions, and not 1970s-style inflation. The Fed is therefore expected to begin hiking its target rate in 25-basis-point increments beginning in Q4 2022. The 30-year fixed mortgage rate should see an increase from 3% to 3.5% by the end of 2023.
To contact PJ about getting pre-approved or refinancing a current loan the give him a shout at (425) 364-4642 or email@example.com.