Is the Housing Market Correcting?

The housing market is moderating compared to the last two years, but what everyone needs to remember is that the past two years were record-breaking in nearly every way. Record-low mortgage rates and millennials reaching peak homebuying years led to an influx of buyer demand. At the same time, there weren’t enough homes available to purchase thanks to many years of underbuilding and sellers who held off on listing their homes due to the health crisis.

This combination led to record-high demand and record-low supply, and that wasn’t going to be sustainable for the long term. The latest data shows early signs of a shift back to the market pace seen in the years leading up to the pandemic – not a crash nor a correction. As realtor.com says, “The housing market is at a turning point. . . . We’re starting to see signs of a new direction, . . .”

Home Showings Then and Now

The ShowingTime Showing Index tracks the traffic of home showings according to agents and brokers. It’s a good indication of buyer demand. Here’s a look at that data going back to 2019 (see graph below) :

The 2019 numbers give a good baseline of pre-pandemic demand (shown in gray). As the graph indicates, home showings skyrocketed during the pandemic (shown in blue). And while current buyer demand has begun to moderate slightly based on the latest data (shown in green), showings are still above 2019 levels.

And since 2019 was such a strong year for the housing market, this helps show that the market isn’t crashing – it’s just at a turning point that’s moving back toward more pre-pandemic levels.

Existing Home Sales Then and Now

Headlines are also talking about how existing home sales are declining, but perspective matters. Here’s a look at existing home sales going all the way back to 2019 using data from the National Association of Realtors (NAR) (see graph below):

Again, a similar story emerges. The pandemic numbers (shown in blue) beat the more the typical year of 2019 home sales (shown in gray). And according to the latest projections for 2022 (shown in green), the market is on pace to close this year with more home sales than in 2019 as well.

It’s important to compare today not to the abnormal pandemic years, but to the most recent normal year to show the current housing market is still strong. First American sums it up like this, “. . . today’s housing market looks a lot like the 2019 housing market, which was the strongest housing market in a decade at the time.”

Bottom Line

If recent headlines are generating any concerns, look at a more typical year for perspective. The current market is not a crash or correction. It’s just a turning point toward more typical, pre-pandemic levels. Let’s connect if you have any questions about our local market and what it means for you when you buy or sell this year.

Top Sales for June 2022 in Coastal Boca Raton

The top sale during the month of June was a contemporary new construction estate on an interior lot in Royal Palm Yacht & Country Club that traded for over $2,000 per square foot - a record for the neighborhood. June also saw one of the first resale transactions at Alina: Residence 812 traded at $3,200,000 - up over $500,000 from when it was first sold in May 2021. Only two condos made the top ten list last month - both at Alina. The remaining homes on the list were sprinkled throughout the region across Blue Inlet, Mizner Lake Estates, Lake Rogers, and Boca Harbor. Half of the homes on our list were sold in the first 30 days, while many took over 120 days to make it to closing.

1371 Royal Palm Way
5  beds |  7 baths | 7,819 sq. ft.
$16,470,000

1801 Spanish River Road
4 beds | 6 baths | 5,600 sq. ft.
$11,995,000

1739 Royal Palm Way
5 beds | 6.5 baths | 8,811 sq. ft.
$11,550,000

501 Kay Terrace
5 beds | 5.5 baths | 4,813 sq. ft.
$6,050,000

799 NE Marine Drive
5 beds | 8 baths | 7,254 sq. ft.
$5,950,000

367 Mizner Lake Estates Drive
4 beds | 4.5 baths | 6,556 sq. ft.
$5,550,000

200 SE Mizner Boulevard Ph-18
3 beds | 4.5 baths | 3,490 sq. ft.
$5,325,000

3798 NE 7th Drive
4 beds | 4.5 baths | 4,710 sq. ft.
$5,250,000

799 NE 70th Street
5 beds | 5.5 baths | 5,600 sq. ft.
$3,649,000

200 SE Mizner Boulevard
3 beds | 3.5 baths | 2,745 sq. ft.
$3,200,000

7700 NE Spanish Trail Court
5 beds | 3.5 baths | 2,932 sq. ft.
$3,100,000

260 NE Wavecrest Court
5 beds | 6 baths | 4,261 sq. ft.
$3,025,000

2800 S Ocean Boulevard 18a
3 beds | 2.5 baths | 2,145 sq. ft.
$2,525,000

4201 N Ocean Boulevard 1204
3 beds | 4 baths | 3,125 sq. ft.
$2,320,000

Homeownership Is a Great Hedge Against the Impact of Rising Inflation

If you’re following along with the news today, you’ve heard about rising inflation. Today, inflation is at a 40-year high. According to the National Association of Home Builders (NAHB), “Consumer prices accelerated again in May as shelter, energy, and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.”

With inflation rising, you’re likely feeling it impacts your day-to-day life as prices go up for gas, groceries, and more. These climbing consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.

If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.

Homeownership Helps You Stabilize One of Your Biggest Monthly Expenses

Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.

Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. When you have a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says, “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.”

So even if other prices increase, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.

Investing in an Asset That Historically Outperforms Inflation

While it’s true rising home prices and higher mortgage rates mean that buying a house today costs more than it did even a few months ago, you still have an opportunity to set yourself up for a long-term win. That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value.

The graph below shows how the average home price appreciation outperformed the average inflation rate in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):

So, what does that mean for you? Today, experts forecast home prices will only go up from here thanks to the ongoing imbalance of supply and demand. Once you buy a house, any home price appreciation that does occur will grow your equity and your net worth. And since homes are typically assets that grow in value, you have peace of mind that history shows your investment is a strong one.

That means, if you’re ready and able, it makes sense to buy today before prices rise further.

Bottom Line

If you’ve been thinking about buying a home this year, it makes sense to act soon, even with inflation rising. That way you can stabilize your monthly housing cost and invest in an asset that historically outperforms inflation. If you’re ready to get started, let’s connect so you have expert advice on your specific situation when you’re ready to buy a home.