Economic Shock | The Housing Market 2022

June 1, 2022

Economic Shock | The Housing Market 2022

Home prices are not crashing anytime soon.

Yes, I hear it in a lot of places, but let’s try to set emotion aside and use common sense while looking at the facts.

Today, I want to go over Fortune’s article presenting data from CoreLogic. It has an interactive map that shows which areas would most likely experience home price dips, so you could go check out that article.

But first, let’s talk about inflation.


I hear a lot of people saying that the inflation we have right now is caused by the Fed pumping in a lot of money right through the bonds that they buy during the pandemic.

And according to Investopedia, “If the Fed buys bonds in the open market, it increases the money supply in the economy by swapping out bonds in exchange for cash to the general public.”

That’s what they did during the great recession a few years back. And this is what they did again in large amounts during the pandemic.

Now, this is what’s happening, according to the article, “Conversely, if the Fed sells bonds, it decreases the money supply by removing cash from the economy in exchange for bonds.”

That’s what’s causing our rates to go up. The Fed is raising the rates because they want to push down the inflation rate by decreasing the money flow.

Impact of inflation on home prices

Now let’s jump into this article by Fortune called “The odds of a home price decline hitting your local housing market, as told by one interactive chart.”

It says, “Historically speaking, that inflation-fighting playbook is particularly hard-felt in the housing market, where spiking mortgage rates can quickly price out homebuyers. That's already starting to happen.” They usually do this.

Here’s the problem. It says, “On Thursday, the average 30-year fixed mortgage rate hit 5.11%—up from 3.11% in December. A borrower who took out a $500,000 mortgage at a 3.11% rate would owe $2,138 per month. At a 5.11% rate, that monthly payment on a 30-year mortgage spikes to $2,718.”

Most people have lower rates right now. Even though the average about a year ago was at around 719, their FICO score is now in the 600s.

So, if we’re looking realistically, the rate is much higher if your FICO score is lower.

But in this example, let’s say you are approved for a 3.11% rate. If somebody was purchasing a property for $500,000, their payment would be $2,138 that’s not including property taxes and everything else.

At 5.11%, it goes up by $600.

That’s a lot. That’s already a really nice car payment or spent on other things. But this is why people are canceling Netflix, I guess.

Even if home prices are up, Fortune says, “It doesn't mean home prices are about to crash. In fact, every major real estate firm with a publicly released forecast model, including Fannie Mae and Zillow, still predicts home prices will climb further this year.”

The good news is that even non-real estate companies are saying “We’re still going to see an increase in home prices.” Unless the rates go up past seven, then maybe not. But we’re not there yet. So far, so good.

Fortune reports, “CoreLogic, which ranks No. 952 on the Fortune 1000, put housing markets into one of five categories based on the likelihood that home prices in that particular market are to fall over the coming 12 months. Here are those groupings:

I've been a real estate agent in California for almost 20 years. I own multiple businesses all throughout the US and the first thing I would want to look at in the interactive map is which areas I should avoid and which ones are good places to invest in.

Most of California is ranked pretty low. Some of it is ranked medium. The areas at elevated risk are pretty sparse. One of them is in Hawaii, two areas in Seattle, and Salem, Oregon.

What this is telling me as a real estate agent and as a real estate investor is maybe I should look at these places and buy, because I know that not just real estate companies are saying that the market’s going to continue to go up as long as rates remain under 7-ish.

These areas might be good to invest in.

“CoreLogic still thinks the chances of prices declining in 2022 are fairly low. Why? The real estate research firm points to the mismatch between inventory and strong buyer demand. That's also reflected in its national forecast. Over the coming 12 months, CoreLogic predicts U.S. home prices are poised to rise 5%. That'd mark a deceleration from the 19.8% jump posted over the past 12 months, but it's hardly the relief priced-out buyers are seeking,” Fortune says.

Lastly, Fortune reports, “George Ratiu proclaimed that “We’re not in a housing bubble just yet—but we’re skating close to one if prices continue rising at the current pace."

In Conclusion

Interest rates aren’t crazy high yet even though they jumped up super quick. That’s why the Fed stepped up to try and put it back under control by raising rates.

It is still a good time to move, so if you need to move, do it.

There are thousands of people still buying homes and we are estimated to go up throughout the year.

If you don’t need to buy, and the rate pushes you out of being able to buy, then chill and wait. But rents are still high, so it is worth considering the pros and cons of rent versus buy.

The point is, let’s use reason, not emotion, in making sound and informed decisions. Don’t listen to the alarmists scaring you out of buying real estate without being backed by data.