2022 Market Update

No doubt you have seen sensational headlines and maybe even heard stories from friends about how wild the real estate market has been over the past number of years. 

The Sacramento Pattern

In the Sacramento metropolitan area, the annual trend for many years is for the market to reach its peak level of activity in June, then gradually slow down through December, then begin increasing each month starting in January. Picture an A-frame roof of a house where the left side is January, the top is June, and the right side is December...that’s kind of what the sales volume looks like for Sacramento’s four-county market area. Prices don’t necessarily decrease with these fluctuations, it’s the number of units sold that moves up and down. Don’t be fooled by headlines as they change every month, the market is usually doing what it’s supposed to do.

Taking it Back to 2008-2018

When the market crashed in 2008, demand for housing decreased significantly, resulting in a lack of construction of new homes. As a nation, historically, we have built about 1.1 million homes per year, but from 2008-2018 we only built around 500,00 per year. Over that time, a deficit of approximately 6 million homes developed, leaving us with a lopsided market of many buyers and few sellers. 

2019-2021

Most people expected the market to diminish in 2020 as covid took its grip on the world, but instead, the opposite happened. We saw the market transition from a strong sellers market in 2019 to a very strong sellers market in 2020, and that trend continued into 2021. When there are 10 buyers for every seller, we get bidding wars and prices that increase rapidly, which is what we’ve been seeing for the past few years. Until the supply of homes matches buyer demand, this imbalance will likely continue. Recent estimates suggest that even if we double construction output, it will take 6-12 years to catch up with demand. 

What to Expect in 2022

None of us have a crystal ball to tell us what the future holds, buying and selling real estate has always been about speculation and educated guesses. Based on the current housing shortage and the amount of time it’s likely going to take to get back to “normal”, we can probably expect demand to remain high and prices to continue increasing. Local experts are anticipating low inventory and high competition in the first quarter. These past few years, the most successful buyers have a committed relationship with a realtor/lender team and an impactful, organized strategy. 

Interest rates are a wild card, if they begin to rise, real estate prices could potentially soften or flatten out. This is something to keep an eye on but most experts aren’t predicting a bubble to burst. Popular opinion is that we will see around 5% appreciation in 2022, which is much more modest than the 20% annual gains we saw in each of the last two years.

Should I Buy Now or Wait to See What Happens?

It is my personal opinion that a person should buy a home when they are at a point in their life that it makes sense to do so. If you can afford it and it makes you happy, then do it. If you’re scared or think the market isn’t right for you, then continue renting. There is no right or wrong answer, your personal worth as a human being isn’t dependent on whether you own a home or not. Rents are steadily on the rise and will continue to do so, locking in a fixed monthly mortgage payment could put your mind at ease and give you a reliable budget to build around. Tax advantages and ability to customize the house to your personal needs and tastes are also great benefits.

I have a handful of clients dating back a few years who wanted to wait for prices to drop before they purchased. They watched from the sidelines as prices went up by 40-50%. They continue to rent and some of them no longer qualify for a mortgage because prices now exceed what they can afford. 

Next Steps

I have a network of professionals ready to help you achieve your goals, we would love to discuss an analysis of your situation and help you build a plan. There is no pressure, we’re here to make dreams come true even if it takes several years to do it. Simply reply to this email and we’ll schedule a time for a chat, then take it from there. I look forward to hearing from you!