MARKET UPDATE JANUARY 2022 FROM TOM RUFF, ARMLS:
One of the things I do each month before writing STAT is to go back and review our commentary from the prior year. The primary reason is to check the accuracy of our reports. In our February 2020 commentary, we discussed falling interest rates, falling inventories, higher sales volume, and rising prices. We described our market as a full-blown sellers’ market with the added caveat, “Anyone waiting for prices to fall, well, they’ll be waiting.” In the 12 months that followed, the median sales price rose 17.3%. Move ahead one year to February 2021, when the interest rate for a 30-year fixed-rate mortgage fell to 2.73% compared to 3.47% the prior year. With a 58% decline in active listings and an 11.8% increase in sales volume, our market transcended into what STAT declared a “full-blown seller’s market on steroids.” The median sales price climbed 27.9% over the ensuing 12 months. So, after the 17.3% yearly gains in January 2020 and 27.9% yearly gains in January 2021, the question is what does 2022 have in store?
The 30-year fixed-rate mortgage has moved higher. It is now 3.69%, 22 basis points higher than February 2020 and 96 basis points higher than last year. Higher prices and higher interest rates impact affordability, and as homes become less affordable, demand will waiver. As a possible precursor, demand was down 3.8% year-over-year in January. I would like to tell you, as a result, home prices will level out soon, but this would merely be a fool’s errand, as ARMLS reported the fewest number of active listings for any February 1 in ARMLS history. As conferred by Michael Orr, “New listing counts have been low over the past few weeks and there is still no sign of the supply situation improving. Dramatic increases in supply is what is needed to correct the imbalance in the market. If demand were to drop to the level that supply started to build again, this would take us towards balance. But this would likely occur at a slow pace that could take a very long time to reach anything close to normality. Demand would need to collapse to get back to balance with supply.”