Is the FED going to crash the market?
Watch the original video: May 2022 Mortgage Monthly Update
Here is your Monthly Mortgage Market Update for May 2022. In this month’s video I am breaking down a “real estate report card.” This will help show you the current real estate data to help you understand why the market is in this position. Watch the video above to learn more.
🤔 What’s Happening in the Market?
The #1 question I get asked a lot is, “what is going on in the housing market, and what I think will happen in over the next few months.” To help you understand, I thought it would be a good time to show you what we call a real estate report card. As we analyze the report card we will be discussing a median home price of $361,658 in Shasta County, California.
📈 Home Appreciation
A lot of people are also asking, “Am I going to see my home value decrease if I buy a home right now?”. If we look at this chart, you will see the 60, 10 and 5 year appreciation values in California, which gives you a long term view of how homes have appreciated in our area. If we look forward, most economists are predicting that we will see homes continue to appreciate over the next year, and every year going forward. This is a result of the housing shortage and the demand of the rising population. So, here in Shasta County the average home priced at $361,658, would be worth 35% more at year 5, which is about $127,000 in equity if you bought a house today.
🏘 Inventory Issues
Next I want to show you the problem that we are facing with inventory. In Shasta County it is expected that over the next 12 months we will see about 2,000 more households come to the market, 1,300 homes will be purchased by first time home buyers, but only 402 homes are expected to be built. This shows why prices are so strong and why most experts predict we will not see a crash in value. There are simply not enough homes to supply the rising demand.
🗓 Mortgage Rates & Monthly Payments
If we look at the next chart, we can begin to see how interest rates effect your purchasing power. A lot of experts are predicting we will see rates continue to rise as inflation rises, and we could potentially see rates reach the 6’s. This is certainly a big difference for most families, which is why many buyers are nervous about rates rising, but there is a very good chance we will see rates come down in the next 24 months.
💵 Are Lower Rates Coming?
Many economists are predicting that once inflation slows down, we will see a stagnant economy, at which point the Fed would reverse their policies and mortgage rates will lower significantly. Many lenders are advising buyers to pay points to bring their rate down or pay up front mortgage insurance. These may be good tools to look at, but if you pay points for a mortgage right now, you probably won’t see those savings for 5 years down the road. Because it is likely that interest rates go down in 2 years, and if you decide to refinance then to take advantage of a lower long term fixed rate, essentially you will have thrown away the money you used to pay points and buy the rate down.
📞 Let’s Chat
I know it is a confusing time for home buyers and we are sitting down and talking with concerned clients daily. If you have any questions about any of this, I am always available and would love to sit down and talk with you. Please reach out if there is any way I can assist you. Have a great day, God Bless.