This is how Plateau City looks on paper when the YoY change nears zero in 2024-25 (above). From Fannie Mae – which, like most forecasts, is guessing that price increases will slow to about half of what they were last year:
When it comes to housing, the report says, “The past year’s demand surge was driven by a combination of factors, low mortgage rates, down payments supported by stimulus checks and other savings, and a pandemic-driven reshuffling of preferences and move timing on the part of many households, all of which are expected to wane. Furthermore, the recent rapid house price appreciation and rising mortgage rates will lead to growing affordability constraints, dragging on home sales, but also likely limiting further price appreciation to a more sustainable pace.”
The economists don’t expect a soft year for home sales, existing sales will slow by only 3.2 percent this year, to the second fastest annual pace since 2006. But they do expect extremely limited inventories to produce “hypercompetitive bidding wars” in which potential homebuyers are priced out of the market.
Rapid price growth will eclipse wage gains and waning stimulus checks and built-up savings, will make it increasingly difficult for many potential buyers. Mortgage-backed security issuance data continues to show the average back-end debt-to-income (DTI) ratios of borrowers increasing, indicating growing affordability pressures. There appears to be ample prospective homebuyers currently, but their volume will likely lessen as the year unfolds.
Changes to the sales forecast are minimal. Total home sales are expected to fall 1.2 percent, an improvement from last month’s -1.4 percent forecast. The 2023 slowdown has been revised from -3.8 percent to -3.6 percent.
Worsening affordability is still expected to dampen home price growth, but Fannie Mae expects prices growth to slow to 7.6 percent from the probable 17.3 percent in 2021. This is still considerably higher than the average pace of 5.4 from 2012 to 2019. Price growth will slow further to 3.3 percent in 2023. The current estimates are higher than the December forecasts of 7.4 and 2.9 percent.
Brian and Yunnie got together for a preview of 2022. Yun touted his usual vagueness and Brian touched on a sensitive subject that long-time blog reader Chris and I discussed yesterday.
The shuffle of older agents leaving the business and being replaced by new-age realtors who only know automated order-taking will make the end of the frenzy somewhat predictable. Because the agents who have gotten into the business over the last 12 years have never experienced a ‘downturn’, it won’t be detected by most until the market has softened considerably. Agents will carry on, and the last thing sellers will do is lower their price enough to sell. Plateau City should arrive by next summer, where sellers and listing agents unwittingly let listings sit for months while waiting for someone to bail them out. Sales drop, and prices stay about the same. It will be excruciating.
“People rushed to buy homes during the pandemic, so two straight years of spectacular performance,” Yun said, pointing to a 7% increase in home sales from 2020 to 2021—from 5.7 million to 6 million, respectively.
While home sales have shined over the past two years since the start of the pandemic, Yun said 2022 is poised to be slightly different.
“I think the sales activity will be shaved modestly,” Yun said, suggesting a 2% reduction in sales next year as mortgage rates increase.
A silver lining on the horizon will be improvements in inventory, with the industry “turning the corner” on the dire shortage of housing supply for sale, according to Yun.
“New construction of single-family homes has been moving steadily higher,” he said, indicating that the market may see more inventory in the spring market next year than in 2021.
Yun also indicated that more people are likely to list their homes now that federal support and mortgage forbearance programs are either ended or are slated to end next year.
Even with a much-needed injection of inventory, Yun noted that agents should prepare for the rising mortgage rates to push activity forward next year as buyers try to secure the lowest rates possible before they climb to 3.7% by the end of 2022.
Buffini’s general advice to agents was to focus on the fundamentals and take advantage of the upcoming business in the winter and summer.
“I know people are working as hard as they can, but there is an old phrase that even a turkey can fly in a hurricane,” Buffini said. “When the wind starts to slow down, if you’re a turkey up at 200 feet, you’re going to be Thanksgiving dinner.
“There are going to be a bunch of people getting out of the business, and we are going to be left with even less experience in the industry,” he concluded.
That would mark a substantial slowdown from the S&P CoreLogic Case-Shiller index’s latest reading of year-over-year U.S. home price growth (up 19.5% between September 2020 and the same month this year). If Realtor.com’s projection comes to fruition, it would also be the slowest 12-month rate of price growth since 2012.
No, this wouldn’t be a housing correction or crash. However, slower price growth would provide buyers a bit of breathing room. Less bidding. More time to search for homes. And maybe even a chance for some buyers to finally save up for a down payment.
“After years of declining, the inventory of homes for sale is finally expected to rebound from all-time lows…Homebuyers will have a better chance to find a home in 2022, but fierce competition and affordability continue to be a challenge,” wrote Realtor.com researchers in their outlook.
Their survey indicated that more people are planning to sell, so that’s good – though our coastal region is dominated by baby boomers, so we might not be as lucky as others:
Real estate has been challenging for many buyers this year, with home prices up sharply and inventory at record low levels. Some buyers may get a break in 2022, but it’s not likely to be in some of the nation’s smaller cities that have seen strong housing demand due to remote work during the pandemic.
The cities that are likely to see the strongest price increases and home sales are described as second-tier cities that offer better affordability and more space compared with the nation’s largest cities, according to a new forecast from Realtor.com. It based its forecasts on recent home sales as well as economic trends, such as unemployment and household growth.
Boise, Idaho, is again likely to be near the forefront in 2022, Realtor.com predicted. That comes after local property prices surged more than 30% in the third quarter, and Boise was named the least affordable housing market in the U.S. — with the city’s median home price jumping to almost $535,000, or 10 times the city’s median income.
Boise is attracting people who want to relocate from expensive tech hubs like San Francisco, people for whom those prices may seem like a deal compared with pricing in bigger cities. And that trend is likely to continue in 2022, said Realtor.com chief economist Danielle Hale.
“2021 was an ultracompetitive year for the real estate market, especially for smaller secondary tech markets. They benefited from knowledge workers being freed up from going into the office every day,” Hale noted. Next year will be “in many ways a continuation of what we saw this year.”
She added, “People are embracing the flexibility of the workplace and moving into areas that are more affordable.”
Most of the top 10 markets for 2022 have a “small-town kind of quality of life, yet they still have thriving local economies,” Hale noted.
Average home prices in the top 10 real estate markets are expected to jump 7.4% next year, or more than twice the national pace of 2.9%, Realtor.com said. Buyers may get a break next year with more inventory entering the market, relieving some of the low-stock issues that hampered home purchasers in 2021, Hale noted.
Many big cities like New York and Los Angeles are forecast to see price appreciations but may not match some of the smaller cities, according to the forecast. Prices in the New York metropolitan region, for example, are predicted to rise 2.3% in 2022, while home prices in the Los Angeles are likely to rise 4.8%, Realtor.com said.
Below are the top 10 markets for 2022, based on estimates from Realtor.com. Forecasts include the change in number of homes sold as well as prices for 2022 versus 2021.
1. Salt Lake City, Utah
Predicted sales change: 15.2%
Predicted price change: 8.5%
2021 median home price: $564,062
2. Boise City, Idaho
Sales change: 12.9%
Price change: 7.9%
2021 median home price: $503,959
3. Spokane-Spokane Valley, Washington
Sales change: 12.8%
Price change: 7.7%
2021 median home price: $419,803
4. Indianapolis-Carmel-Anderson, Indiana
Sales change: 14.8%
Price change: 5.5%
2021 median home price: $272,401
5. Columbus, Ohio
Sales change: 13.7%
Price change: 6.3%
2021 median home price: $298,523
6. Providence-Warwick, Rhode Island-Massachusetts
Sales change: 8.1%
Price change: 9.5%
2021 median home price: $419,813
7. Greenville-Anderson-Mauldin, South Carolina
Sales change: 11.4%
Price change: 5.7%
2021 median home price: $305,078
8. Seattle-Tacoma-Bellevue, Washington
Sales change: 9.6%
Price change: 7.5%
2021 median home price: $666,754
9. Worcester, Mass.-Connecticut
Sales change: 8.4%
Price change: 8.2%
2021 median home price: $397,188
10. Tampa-St. Petersburg-Clearwater, Florida
Sales change: 9.6%
Price change: 6.8%
2021 median home price: $335,814
Article includes a 2:30-min video of Boise market conditions:
More ivory-tower musings here, and it’s hard to believe that they could be so blind.
How can analysts read these statistics and decide that the frenzy will come to a complete halt, which is what a 2.5% YoY gain will feel like if it were to happen? Because of a break for the holidays?
That’s the best you got?
Predicting that there will be additional inventory for-sale when it’s been plummeting everywhere is naïve too.
At least their headline writer got it right:
‘Lower Appreciation Not Yet Reflected in Gains’
While it is clear that the growth of home prices has started to slow, reports on the results of the deceleration are diverging. Earlier this week Black Knight reported its Home Price Index (HPI) was up 0.6 percent in October, today CoreLogic puts the gain at 1.3 percent.
The CoreLogic report says its reported October appreciation is a full 1 percentage point lower than the peak posted for April. The annual rate of increase in the HPI for the October was 18 percent, identical to the 12-month growth it reported for September, and the highest recorded in the 45-year history of the index. Incidentally, in April the annual increase was 13 percent, showing the rapid run-up of prices over the summer and early fall.
Detached properties(i.e., single-family residences) continue to appreciate at a much higher rate (19.5 percent, also a record high) than attached properties at 12.9 percent. This also differs substantially from the 11 percent gain for single family homes reported by Black Knight which also reported that condo prices are now rising faster than those for single-family houses.
Price gains remain strongest in the Mountain West, with Arizona and Idaho again topping the charts with growth of 28.8 percent and 28.7 percent, respectively. Utah was third at 24.5 percent. Twin Falls, Idaho had the fastest growth among metros at 35.8 percent, but the South did weigh in. Naples, Florida was second at 33.5 percent.
Despite affordability challenges, a recent CoreLogic consumer survey shows that over half of respondents across every age cohort said that owning a home has always been a goal of theirs – further supporting the outlook that consumer desire for homeownership remains.
“New household formation, investor purchases and pandemic-related factors driving demand for the limited supply of available for-sale homes continues to propel the upward spiral of U.S. home prices,” said Frank Martell, president and CEO of CoreLogic. “However, we expect home price growth to moderate over the near term as many buyers take a break for the holidays.”
CoreLogic’s forward looking HPI projects that slowdown to result in a year-over-year increase of only 2.5 percent by next October “as affordability and economic concerns deter some potential buyers and additional for-sale inventory becomes available.”
Yunnie was in town this week, forecasting the safest bets like everyone else:
Is the economy back to normal? It’s the question everyone wants answered as we navigate through a semi-return to normalcy amid the pandemic, and it’s the question Dr. Lawrence Yun, chief economist of the National Association of REALTORS® (NAR), posed as he opened the Residential Economic Issues & Trends Forum at NAR’s annual REALTOR® Conference & Expo, this year held in-person at the San Diego Convention Center in California.
While several market indicators lagged throughout the pandemic, the housing industry was an outlier, experiencing better than average conditions that have been sustained over the course of the last two years. But how long will it continue?
“All markets are seeing strong conditions and home sales are the best they have been in 15 years,” said Yun. “The housing sector’s success will continue, but I don’t expect next year’s performance to exceed this year’s.”
At the moment, home sales are the standout. And although there should be a slowdown going into 2022, said Yun, they will likely remain above pre-pandemic levels. The outcome, however, will largely depend on the influx of inventory, and as mortgages exit the forbearance program, we should begin seeing additional homes enter the market.
“With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”
Affordability has been a real challenge these last two years, with low mortgage rates and high buyer demand providing some balance. But now with rates rising as we come out of the pandemic, fears concerning inflation are surfacing.
Yun predicted that mortgage rates will see an increase of 3.7% in the coming months, a rise he attributes to persistent high inflation. Home prices rose by 12% on average in 2020 and 2021, while inflation rose 3%.
“Rising rents will continue to place upward pressures on inflation,” he said. “Nevertheless, real estate is a great hedge against inflation.”
In terms of a bubble for 2022, the signs are just not there. While home prices have outpriced people’s income overall, said Yun, with value growth matching up to 2005 levels, we don’t have an oversupply situation or risky subprime lending like we did during the last market crash.
An area to watch, which fell behind as a direct result of the pandemic, is the jobs market. According to Yun, since the lockdowns were lifted, 18 million jobs have been created, but we are still behind by 4 million jobs compared to pre-COVID levels.
The increased remote work trend could have a long-term impact on jobs and work preferences, affecting how and where people choose to live.
“We are only in the first innings of work-from-home options,” Yun said. “People have not fully digested the work-from-home-flexibility model yet in determining home size and locational choice.”
Zillow has been vilified for many reasons, but the one thing they have going for them is the viewer data for each area. If their 2022 projections are based on the number of clicks on listings, then their forecast should be a reasonable reflection of the actual demand – a macro look that no one else has.
The Big Question: if they are so confident about the 2022 appreciation, why did they quit home flipping?
Their first move of suspending the program until next year while digesting their inventory was understandable. But why quit altogether? I think it was due to having billions invested in a high-overhead venture that was new to them – and the rich guys hit the panic button, instead of calling me.
I’m sticking with my 2022 NSDCC Pricing Guess of +15%, and agree with Zillow that most areas could see +20%. But this frenzy is going to come to a screeching halt with no notice (they always do), and it will be when you least expect it.
P.S. ALL of their forecasted value increases here are higher than last month:
NW Carlsbad, 92008:
SE Carlsbad, 92009:
NE Carlsbad, 92010:
SW Carlsbad, 92011:
Carmel Valley, 92130:
Del Mar, 92014:
La Jolla, 92037:
Rancho Santa Fe, 92067:
Coastal Oceanside, 92054:
S. Vista, 92081:
University City, 92122:
The additional last four areas show how overwhelming the demand is for all of north county.
Our drop in inventory is the most pronounced of any area in the country.
During the previous peaks in pricing, more homeowners would gladly sell for a record price…..and parlay their gains into a bigger home down the street or around the corner. But that was when you could buy an upgrade for an extra $100,000 or $200,000 – now it takes a million!
What about the long-timers? Those who moved up a couple of times were able to achieve their so-called dream home, and have now become very comfortable. Even though Prop 9 was intended to encourage the seniors to take their ultra-low property tax basis with them when they downsize, it’s not enough of a benefit to change the trend.
The end result? You need to leave town to make moving worth it. But nobody wants to go!
Of all the towns in America, we probably have it better than anyone….which means we should have the fewest number of people who are willing to leave town.
The logjam in the market is caused by the seniors who are aging in place, instead of downsizing or moving to the retirement home. Those who are over 75 years old are probably staying their current home for the duration. We need more people who are ages 55-75 to pack it up!
The only hope is that the baby boomers who haven’t saved enough money for retirement are counting on their home equity to get them through. It doesn’t mean they have to move though – they can get a reverse mortgage to tap a decent chunk of their equity – without monthly payments!
But for those NSDCC locals who are willing to leave town in order to liberate their home equity, they will enjoy a hyper-frenzy in 2022.
I don’t think there will be enough of them for us to get back to normal inventory levels. It could actually get worse in 2022, and inventory go down. Can you imagine a market with less inventory?
Don’t be surprised if we have fewer homes for sale in 2022 – causing the frenzy to blast off:
Virtually every house sells.
Pricing goes ballistic.
Homes are sold differently.
If we do have additional homes come to market, the existing demand will soak them all up. It will take a flood of inventory to cool off the demand – meaning more than twice the inventory we had this year.
One source of additional inventory might be the retiring realtors who can’t hang with the big dogs, and they turnover their client database to an agent before they leave town. If you are in that category, let’s talk!
This forecast suggests that prices would still be cooking in 1Q22, but once the spring selling season gets rolling, the median prices will level off? It would take a flood of inventory to pull that off. They blame rising rates, but when that happens it usually causes buyers to hurry up and buy. As long as mortgage rates are in the 3s, we’ll be fine.
It was inevitable that the housing market would slow down a bit. After all, home prices can’t continue to outpace income growth by a 4-to-1 ratio forever, right?
However, even as the market has seen some softening so far, price hikes and bidding wars are still ongoing across the U.S. And the industry consensus is that whatever cooling comes next year, it will slow—but not stop—the continuing rise in home prices.
However, that assessment isn’t shared by the Mortgage Bankers Association, an industry trade group based in Washington, D.C., which recently published its 2022 forecast. While the Mortgage Bankers Association foresees the median price of existing homes posting a 15.3% year-over-year gain to $362,000 in the first quarter of 2022, it sees prices beginning to fall as the year progresses. The group expects the median price of existing homes to end 2022 at $352,000. That would represent a 2.5% year-over-year drop in home prices.
What’s going on? A lot of it boils down to inflation—or what higher inflation means for the market.
The latest reading of the consumer price index in October made it clear that stubbornly high inflation could be around longer than economists were assuming. That has increased the odds that the Federal Reserve will raise interest rates, and thus mortgage rates, as a means of reining in inflation. A rise in mortgage rates—which have dropped to near record lows as the Fed kept money cheap to ease the economic effects of the pandemic—would lock some buyers out of the market altogether and put downward pressure on prices.
The Mortgage Bankers Association is forecasting that the average 30-year fixed mortgage rate will hit 3.7% by the third quarter of 2022, and 4% by the end of 2022. That would be a big increase from the current 3.09% rate, and is well above the 3.4% rate that Fannie Mae projects by the end of 2022.
The latest from Altos data @mikesimonsen: financial markets are correcting dramatically + #mortgagerates are at their highest in 2 yrs. How quickly will this impact #homebuying decisions?: https://hubs.ly/Q012SS230
Jim the Realtor is legit - I interviewed three brokers; he said list price should be $100,000 higher than the other two brokers; listed it with him and had all cash (no financing) offer in two days, five day contingency period, closing in two weeks - and it closed at his recommended list price. I could not recommend anyone more than I recommend Jim the Realtor.
When we moved to San Diego in 2005 we rented a big house on Mt. Soledad (La Jolla) with 180 degree ocean views for the same payment as a mortgage on a dump in Chula Vista. Clearly something was wrong. Yet, the media was full of the usual happy-talk nonsense, so I was glad to find Jim's blog. I've followed his honest assessments and data since.
We decided to sell and move to AZ at Thanksgiving. Dec. 1st we met with Jim to sell our home. We closed today (29 days later). Jim orchestrated a feeding frenzy -- we had 25 showings in 2-1/2 days, multiple offers, and sold for well over asking price. I'd say he earned his commission! We have owned and sold homes in 5 different States always using experienced, productive, full-time realtors. Jim outshines them all.
You don't decide to sell and close 29 days later over Christmas (with COVID lockdown) without some miracles. Donna was amazing at performing lots of those miracles and ensuring that everything was done right and on time. They are a terrific team with a very responsive and professional network.
Where do we begin..2020 has been a year for everyone. When COVID hit and shut down both my husband and my businesses, we were left with a mortgage and very little income coming in. We were stressed, scared and felt stuck. We made the hard decision to sell our home and move out of state. We contacted the Klinges' and spent a good hour going over what we hoped we could accomplish. Jim and Donna came over with comps in hand and suggestions on improvements to get our house ready for the market. It was overwhelming to think about, but Donna was there and one step ahead in every scenario. Basically we just approved what they suggested and Donna handled literally everything. We placed our house on the market and within the first day we had multiple offers well above asking price! We couldn't believe it. We were overjoyed! Jim countered the offers to weed through them, and everyone came back with way more. It was amazing, and we are ?? sure it was because of the staging and repairs the Klinges suggested we do.
Due to unforeseen dishonesty from the buyers lender, we hit a big hurdle when trying to close. We had already moved out of state and were shocked when three days before closing the lender dropped a bombshell on the buyers and us. However, Jim and Donna handled it like veterans, not afraid to play hard ball and represent their clients. After a few phone calls with us, and several between Donna and the lender, they had a plan B-Z to make sure we were taken care of. In the end we closed with even more money than we ever thought possible and with very little work from us. The Klinges handled this entire "2020" worthy event with the utmost professionalism and did everything in their power to not only make this as smooth as possible for us, but we also walked away with more money from the sale of the house than we ever hoped for. After working with Jim and Donna, you don't ever use anyone else. They are hands down the best team to represent you in any scenario.
Working with Klinge Realty Group was a great experience! They are very responsive, professional and knowledgable about the real estate market! I would definitely recommend Klinge Realty Group.
Jim and Donna Klinge made the sale of our condo extraordinarily easy. They know the market and gave us sound advice backed by details and very considerable experience, reflected both in the initial pricing and subsequent negotiations. They work together as a team and are always available to talk. We had a few challenges with our property and they were able to coordinate the resolution to everything, including items that I would not think would ordinarily be their responsibility to handle. They made the whole process effortless on our part. They are folks with high integrity and we cannot recommend them highly enough.
Review for Member: Donna Klinge
I cannot believe there are no reviews of Donna yet, ugh!! She is the secret sauce of the Jim Klinge/Donna Klinge combo! I will touch on Jim here, but Donna is why I'm so totally loyal to these two (no offense to Jim :)).
I consider myself a rather savvy buyer/seller. I've bought/sold 7 times in about 15 years. On the buy side, Jim is the PERFECT combo of: completely digitally savvy (he will pull data all day long until you feel comfortable with your chosen house, area, school district, anticipated appreciation rate...anything!), he's super well respected and known in the area by other agents, an amazingly cool but strategic negotiator, is totally devoid of desperation for a sale/commission, and more.
Then once you get into contract phase, Donna literally handles every last and final detail in a concierge-like manner -- totally shielding you from the daily back and forth, noodling and annoyances of the buyer's requests. She solves it ALL; it's miraculous what that woman accomplishes over and above what is even expected in a buy/sell transaction.
On the sell side, Jim and Donna do the same, but even moreso. Donna in particular truly takes everything off your plate: she'll manage getting the house painted, the carpets replaced, she'll go on site (as she Jim both did for me when selling our rental properties) to work with the renters and make sure the house is ready to show -- freeing me to have to take time off of work to do so. They work with A+ integrity, too, so you know you are serving all parties fairly and lawfully throughout.
A home purchase/sale is the most considered you'll ever make. HIRE A SAVVY AGENT, not a friend!, and get what you need out of the transaction. Jim and Donna are our agents for life.
Jim and Donna Klinge are by far the most professional, personable and responsive realtors I have ever worked with. They provide VIP concierge level service in every area of the process of selling your home. My home was marketed so successfully that we received an offer the day after our first and only open house. Thanks to Jim's pricing and negotiating, our house is now the highest sold in our community. Jim's vast experience means he has worked with several realtors and knows the market all over north county. Donna is AMAZING in processing everything in the transaction. She scheduled trades people to work on the house in preparation for the sale as well as the repairs needed before closing. She communicated clearly every step of the way about what would be happening. She took the weight off my shoulders for the whole process. I will always use Jim and Donna for my future real estate needs and I whole heartedly recommend them to anyone buying or selling a home.
Jim and the team at Klinge Reality are without a doubt the best in the business! Not only was Jim helpful and extremely knowledgeable, he was patient and determined to help me find my first home. Jim and his team have been in the business for many years, and it shows. Jim is a wealth of knowledge and was my biggest proponent despite the temperature of the competitive market. I ended up getting the perfect property in my dream neighborhood all thanks to Jim. From the day my offer was accepted, Donna was a real lifesaver. She was extremely helpful, responsive, and knowledgeable when it came to every minute detail, and held my hand through the process. As a first time home buyer I had no idea what the process would entail, but Donna curtailed every concern I came across and made the escrow process feel seamless. Jim and Donna provided me the best home buying experience, and I am very grateful for all they did for me. It was truly a pleasure to work with Jim and Donna and I am already looking forward to the next time we work together!
Review for Member: Richard Morgan
Richard is an amazing realtor! He has high integrity and genuinely cares about his clients and their needs. Richard paid close attention to what I was seeking in a home and was very patient in our search to find it. I would highly recommend Richard and will use him for future transactions. Truly a different kind of realtor experience!
Could not be happier with my experience with Jim and his team. He helped me sell a very unique and challenging property. Throughout the entire process he was always available, honest, transparent, trustworthy, and always put my interests as a seller first. A (rare) true professional! During close of escrow Jim went above and beyond to complete the deal. It would not have been possible without his experience, fantastic team, and pure dedication. Highly recommended!
Thanks Jim and Donna Klinge!