It’s real estate prediction season and I have a few thoughts about the beginning of next year. I’m cautious about predicting because my crystal ball is broken, but it’s a no-brainer to say we’re poised to start next year with heavy competition.
Big 2022 market update: I’m doing a big market talk at SAR on January 18th from 9-10:30am. Hope to see you there. Sign up here.
Predictions: First off, nobody knows the future, so I take predictions with a grain of salt. If 2020 taught us anything it’s that it’s impossible to predict the future with certainty. With that said it seems most data sources are predicting anywhere from 2-7% home price growth for 2022. So far it seems like the theme is, “The wild stallion market of 2021 will become tamer.” And almost everyone has disclaimers to say what happens with rates and inventory could change the prediction. Calculated Risk has a table with specific predictions.
Zillow didn’t crash the market: By the way, a few weeks ago some people were saying Zillow failing as a flipper would cause the housing market to crash. Well, that didn’t happen. My advice? If you’re listening to anyone who keeps making predictions like this, find people who let data form the narrative instead. By the way, here’s a real estate prophet test I made a few years ago:
THE BIG POINT:
Buckle up for next year: No matter what happens throughout 2022 as a whole, we are poised to start January at a really competitive place where the market continues to feel lopsided. The truth is we’ve experienced some normal seasonal slowing this fall, but the market still feels like it’s on steroids as most stats are elevated beyond normal levels. The bottom line is we are going to start the year with anemic supply and strong demand as buyers continue to devour listings (even in the midst of affordability declining). This doesn’t mean the train can keep going forever, but I am saying buckle up at the beginning of 2022 because the market is poised to start ultra-competitive.
Fewer listings since the pandemic: Here is a quick look at the supply problem we’ve been having. New listings are in blue and pendings are in red (since 2018). Do you see what happened in 2020 where we started to have fewer listings hit the market? When the pandemic began sellers pulled back and we just haven’t returned to normal levels yet. Though pending contracts have been strong, which means buyers are devouring what is available.
Let’s talk about Omicron: Honestly it’s exhausting hearing about new variants of COVID-19. I am still making healthy choices, I’m boosted, and I’m doing all I can on my end to promote safety. But I’m also fatigued with the non-stop narrative. Anyway, when it comes to real estate this is something we must talk about because we need to get through this pandemic for any hope of normalcy. There is no mistaking we’ve seen fewer listings hit the market in Sacramento since the pandemic began, but this is also happening nationally (see below).
Staying in homes: Even when we get through this pandemic eventually part of me wonders if we’re going to have fewer listings due to so many homeowners locking in sub-3% rates as well as a huge focus on remodeling, installing pools, building the perfect backyard, and creating space to work from home. In other words, people have been positioning themselves for financial health and creating a more perfect home to meet their needs. It seems like that gives more incentive to stay put, so we’ll have to watch stats carefully in coming years.
Seriously man, you want more visuals? Here are a few more visuals to get a sense of how listings have changed through the years. The downfall of these images is they only represent a snapshot of the market. Basically each year on December 1st I pulled the number of listings. This is valuable, but the ideal image is the first one above where I show new listings throughout the month. However, even the monthly image shows a dramatic dip in listings these past two years.
Weird times: When comparing 2020 and 2021 we’re starting to see more similarity with the number of listings. When 2020 first began it was a drastically different comparison to 2019, but now we’re starting to have similar numbers between 2020 and 2021. In other words, from a stats perspective this is sort of a new pandemic “normal” so to speak. Weird times for sure.
Okay, that’s it for today. Thanks for being here.
Questions: What do you make of the predictions for 2022 so far? What are you seeing out there in the market?
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I really hope next year is good. I’m defiantly concerned that we have such strong economic numbers nationally and yet consumer confidence is very low due largely to consumers seeing rising prices and inability to buy the things they want to buy when they want to buy them. While we wait for supply and demand to balance, could that negative sentiment torpedo an economy that is strong on paper? I hope not.
Thanks Gary. Yeah, that’s a big thing. What happens with inflation? So far the housing market is going strong, but it feels like inflation is another x-factor that can affect the market. I cannot believe I paid about $5.00 per gallon for gas the other day. With a new teenage driver in my house I’m definitely telling him to drive slowly. 🙂
Ryan it might be time for a Tesla in the garage, Lol. Great article as always.
It might be. And today my son passed his license test. I have another way on the cusp of getting his license. Oh man, adulthood is expensive. 🙂
Thanks Rick.
Well first off Happy Holidays, hope the season is off to a good start for everyone. And I don’t mean on the RE side of things. Looking at this comment on more of I truly hope family and friends are doing well inspite of Covid-19 variant #256. listings are off a bunch here in my next of the woods, about 54% over the last two years, which has brought us to a low not seen in over (well doggone near forever). The key as all of us know is what do interest rates do in 2022. This mix signal from the Fed and the potential Gov’t spending programs could be an issue and force the 10-year treasury back above 1.75% and hold. If it does and it moves the 30-year mortgage back up into the upper 3% of over 4% then I think this market will need some time to understand if it wants to go up, down or sideways. I laugh every time I think about over 4% as being an issue. Heck I still remember my first property interest rate at 14.5%. Yikes the times they do a change. Enjoy and again Happy Holidays to the Pied Piper- Ryan and to the entire group of followers.
Thanks Brad. I appreciate your take and the numbers here. I suspect most markets are just like mine and yours where listings have been sparse. For years we’ve been hearing about mortgage rate increasing and it seems many are now saying, “No, but this time we really think they will rise.” We’ll see. I do have a SacBee article where a real estate professional in the 90s was saying, “Rates will rise” and essentially they kept going down for decades after this quote… Anyway, for now we are poised to start strong and then we’ll see where the market goes. There are certainly many factors to watch.
In light of square footage changing in my market lately (lower square footage of properties sold), it does seem it’s possible some of the rush to the market during the pandemic has begun to fade. I’m just saying if that’s the case (I need a little more data to be sure), then it’s only natural to see a tamer market so to speak… Thus some of these prophecies are very safe and rooted in logic and data. But you know what? Nobody knows the future for sure.
Interesting on home size shift. Need to look into that one item….
Take good care my friend.
Hi Ryan,
I love your take on the local market. Of interest to me recently is the trend to lower turnover, people are staying put longer, and that started well before COVID hit.
Maybe COVID is a reason for the recent home improvement rather than sell/buy but the data shows a consistent trend of people staying put for longer.
Here is a link to US Census data on this topic. The amount of data available there is simply incredible. Making sense of it is the fun!
https://www.census.gov/library/visualizations/time-series/demo/historic.html
https://www.census.gov/content/dam/Census/library/visualizations/time-series/demo/geographic-mobility/figure-a-4.png
This one shows that homeowners moving rate very steady over the years. It is renters who are staying put longer and the great recession was the beginning of the slowing down.
Thank you Don. I absolutely love stuff like this. Please feel free to share anything like this whenever you see it. I had not personally seen these yet, though I do know Redfin published some data in 2019 stating owners on average were staying in their homes five years longer than they were the previous decade. So owners were essentially staying put for 13 years on average instead of just 8 years during the prior decade. I suspect we’ll see this number grow. I do know NAR puts out a figure like this, though I don’t have the website handy right now. I just emailed a Realtor friend who knows the site though, so I’ll post it when I get it.
You are right that this trend was happening before the pandemic and I suspect the pandemic will add to the number. I would be shocked if it didn’t. On a serious note though one of the factors here is larger homes have been built for a couple of decades and they are simply more suitable for families over time. I’m sure there are other issues also including changes in demographics. I have the graphs to help show this dynamic in Sacramento over the past 20 years and nationally homes have gotten larger (though they did take a dip in recent years too).
By the way, I’m waiting for state-to-state migration data and I’ve yet to see the Census Bureau publish anything, though we should get that very soon presumably. I’m so anxious to write a follow-up piece about California migration once data is put out there. If you happen to see anything, please advise. So far I have yet to see 2020 figures posted at this link, though I did see some of the stats you shared actually included up to 2021, so clearly there is some data out there. https://www.census.gov/data/tables/time-series/demo/geographic-mobility/state-to-state-migration.html
Thanks Don.
Okay, here is the link. NAR data from 2018 shows owners are staying 13 years on average, but they say the average was 10 years the previous decade (so slightly different than Redfin data). There is an interactive portion at the bottom of this link, though data is based on 2018 only. Basically in the Sacramento area the number looks to be 11 years. Thanks to Erin Stumpf for the link. https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes
Great Link Don, Thank you.
Hi Ryan, I am also tired of the Covid-19 stuff. My appraiser colleague went way up to Maine this past Thanksgiving weekend. Having the snowmobiles being serviced by the local guy. The machines were not ready because the 40 year old fellow who services the machines died from Covid about a week ago. (Non-Vaccinated) The business is closed for the season. Ken MacDonough SRA
That is so awful to hear. I think of an appraiser who recently passed of COVID also. It’s just terrible to hear so many stories like this and I’m guessing mostly all of us know someone or multiple people who have passed. It’s awful to have 40-year olds passing away though. That’s too young. I hope I don’t sound callous to mention having fatigue here. I just find myself being informed about all the important virus news, but I’m also intentionally distant from obsessing over daily news because it’s too much to handle. I think it’s so important to cultivate inner peace.
Hang in there and be safe, Ken.
Your comments about people staying in their homes make me think of the show “Love it or list it”. There are two hosts on the show, one that helps the owner renovate their home and the other one who tries to find another home for the owners to move to. At the end of the show, the homeowners decide either to stay in their home or move to the new home that was found. People have gotten their homes and finances like they like them so to speak. They have refinanced to some of the lowest rates in history and renovated their home to get it just like they like it, so why move? It will be interesting to see how things unfold in 2022. I hope you and your family have a great Christmas season, Ryan.
Ha. Classic, Tom. I’ve seen that show. Honestly the show became too formulaic for me, so I found myself fast-forwarding to the end to see the remodel and the big reveal. To me it felt like they would always invent some drama somewhere throughout the remodel process. Anyway, I love your parallel here. Don’t confuse my negative commentary with gratefulness for a good comparison. 🙂 And let me say it’s amazing how we can make space work sometimes without moving. Regarding rates we’ve basically seen rates decline for many decades in a row, but I think we hit an inflection point these past two years where it just created chaos for movement. So many refinances and so many people making real estate decisions to buy. I’m anxious to see the effect in years to come on people staying put or not.