Housing Market Update: December 2022
More promising news came out this week when the Federal Reserve began their two-day meeting on Tuesday.
The Consumer Price Index (CPI) numbers for November were released and showed a 7.1% increase in prices as compared to the same time last year. This was a 0.1% increase from October.
Economists had expected prices to rise at a 7.3% pace year-over-year, and a 0.3% month-over-month increase.
This marks the 5th straight monthly decline in CPI figures, a promising sign that inflation is steadily slowing after it reached a 40 year high earlier this year. Although Tuesday’s news was better-than-expected, high inflation remains a concern for the Fed, and for American families.
On Wednesday, the Fed raised its benchmark rate by 1/2 a point, making it the 7th increase this year. The rate of increase is lower that we’ve seen of late (the past few meetings have seen a .75% bump), but it’s still an increase, and borrowing is still significantly more expensive than it was just a year ago.
As of today, the average rate for a 30-year, fixed-rate mortgage is 6.33%, down from mid-November, when it peaked at 7.08%, but up significantly from the first week of January when rates were at just 3.22%. Mortgage rates are currently at a 10 year high.
Economists don’t expect inflation to slow dramatically any time soon (due in large part to pressure on wages as businesses struggle with a shortage of workers) but they do expect the Fed will eventually be forced to pivot or reverse rate hikes, perhaps even by the second half of next year to avoid a recession.
As the end of the year approaches, here are a few other trends of note:
· Home prices are ticking lower with the median price nationwide currently around $415,000. The housing market slows during the holidays, and the low point of pricing each year is during the 2nd week of January, after which we see pricing begin to increase for the spring.
· Trends show that the threshold for affordability for American homebuyers is around 5.5%. If rates continue to stay in the 6% range, it will be interesting to see if the pricing trends stay the same during the first quarter of 2023.
· Available of inventory of homes for sale is down 2.5% from last week which is typical for this time of year as the holidays approach. We continue to see record low levels of inventory—there are 36% fewer homes on the market now than in 2019.
Additionally, there are 28% fewer new listings than there were at the same time last year. Inventory last year was low due to buyers taking advantage of historically low interest rates. Now though, it’s the sellers that are holding back to cause low inventory as high interest rates constrain inventory.
Whatever your home goals are in the new year, I’m confident there are solutions for you! As always, please feel free to reach out with questions about your specific situation.