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?