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  • Writer's pictureJoseph Gunerman

When Will The Market Slow?

Believe me, this is the most common question that I get and I wish that I held the crystal ball. While I can’t predict the future, what I can do is lean on data, and the data that we have has helped us be extremely accurate in predicting the market. In March 2021, everybody was asking the same question. I told them then that I didn’t think that we were anywhere near the top of the market, and that it would be a long, lonely, unsatisfying wait if you were determined to wait for prices to come down. Why? Rates are historically low, there is no mathematical way for inventory to catch up with demand, and as we hit record inflation everybody is seeing just how valuable a fixed mortgage is. In 2021, house prices nationwide appreciated at an unprecedented rate of almost 17%. Well, in 2022, we are already outpacing 2021’s record appreciation. Let’s talk about a few key reasons why and what it might mean for the future.


I’m sure you’ve heard about the inventory shortage and all of the chatter about how there’s just nothing for sale. While it’s true that inventory is falling well short of demand, you might be surprised to learn that there are actually many more houses sold so far this year than at the same time last year. As a matter of fact, there have been almost 7% more houses sold in each of the first two months of this year than in 2021. Yes inventory is low, however the market is being driven just as much by record demand as it is by low inventory. With millennials entering the market at a record pace and investors looking to capitalize on low rates, we have higher home buying demand across the country than we’ve ever seen. Based on the size of the millennial age group, we believe it’s likely that high demand will continue for months.


Rates are hovering just below 4%, and while that’s 1.5% higher than january of 2021, it’s clear that we aren’t even close to pricing most buyers out of the market. This is the craziest stat for most people to comprehend, because if you had a $700,000 maximum budget in January 2021, your budget is probably just under $600,000 now. That is while we are seeing 17% yearly list price appreciation. However, we are STILL seeing 10+ offers on nearly every single single family home in Northern Virginia, and 4-7 offers on most townhouses. The data is screaming at us that buyers are not even close to being priced out of the market, and we know that it’s not because they’re being given a mortgage that they can’t afford. Post 2008, the lending standards are much stricter, and the flood of buyers entering the trenches on each house can afford what they’re offering… often $100,000 over asking. With this many offers on every house, and prices going up by the month, there is no indication that we’re near the top of the market.


The final factor in this market that I want to touch on is what role inflation is playing in the market. With inflation hitting record highs of about 7%, many people are flocking to 30 year fixed mortgages. Rents are rising at a historic pace, and every time we’ve entered a heavy inflationary period people hedge against inflation by locking in fixed rate long term investments like residential real estate. Many, myself included, believe that it will be a lengthy and brutal fight against inflation and that real estate is a great place to create a fixed monthly payment for housing over coming years. Instead of waiting for the market to slow down, and paying more money each year in rent, lock yourself into a low monthly payment now!


If you take one thing away from this, it’s that you should be buying NOW if you have the cash available for a 3% down payment and 3% closing costs. You will not out-save the market while you wait, and the prices are nowhere near plateauing never mind coming down. Each month or year that you wait, you’re losing buying power as rates rise, and the homes in your dream neighborhood are becoming more expensive. To my buyers who bought early last year, congratulations on your added equity and super low payment!! To my buyers who are buying now, credit to you for ignoring the noise in the market and congrats on winning the bidding war, and to all prospective buyers out there, CALL ME and let’s have a chat about all of this!



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