It's no secret that today's housing market is far from buyer-friendly. Not only is real estate inventory down across the board, but home prices are way up on a national level. Throw in the fact that mortgage rates have risen steadily since the start of the year (and may very well continue to rise in response to rate hikes from the Federal Reserve), and it's no wonder buyers are growing increasingly frustrated by the day.
If you're an everyday buyer looking to purchase a home, or a real estate investor hoping to add to your income property portfolio, you may be wondering what the summer has in store for the housing market. But you may not like what you'll hear.
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The market is unlikely to cool off
For the housing market to cool down substantially, something needs to give. Either buyers need to drop out of the market in droves or housing inventory has to ramp up significantly.
Neither is particularly likely to happen this summer. In fact, normally, the spring months are when we see a major increase in property listings. But so far, there's no indication that housing inventory has climbed significantly since the start of that season. As such, we should expect the sizzling market to hold steady well into the coming months, making summer a difficult time to buy.
Now to be clear, this isn't to say that home prices will increase from current levels. That's not very likely, given that mortgage rates have risen so substantially and also because housing inventory has picked up modestly compared to the start of the year.
But we also shouldn't expect a massive uptick in property listings. A lot of people have held off on selling their homes due to pandemic-related and economic uncertainty. Meanwhile, right now, COVID-19 cases are once again rising in parts of the country, and some experts are sounding a warning about an impending economic recession. Current homeowners may feel more secure sitting tight rather than upending their living situations at a time like this.
When will home prices start to come down?
As of the end of March, there was a two-month supply of available homes on the market, according to the National Association of Realtors. In the coming months, that number may very well increase.
But ultimately, it takes a four- to six-month supply of available homes to create a scenario where neither buyers nor sellers have the upper hand in the real estate market. And we're nowhere close to that scenario at present.
At some point, more inventory is bound to hit, which should drive home prices down to more moderate levels. But it's hard to predict when that will happen. And there's a good chance it won't happen in 2022 at all. That means prospective buyers and real estate investors alike will have to sit tight and exercise patience, because anyone who buys a home this summer ultimately risks overpaying in a very big way.
