Real Estate Overview of 2022

Last year was a very interesting year in real estate. Let’s be honest, the last 3 years have been very interesting years in real estate. Real estate in 2022 came with its own set of challenges. Just as quickly as the market took off in 2020 it slowed down in 2022. Don’t get me wrong. Everything was going great in the beginning. Homes were still selling quickly, but many buyers had found the home they were looking for so the competition wasn’t as fierce. Then April and May happened. Here are the 3 main things that happened in real estate in 2022. Next week we will look into what that means for the market as we start 2023.

Changes in Inflation and Mortgage Interest Rates

In April, we saw mortgage interest rates first start to go up due to inflation and the market came to a screeching halt. Everyone was so surprised by how much the rates rose in such a short period of time. With so much uncertainty in the economy, many people decided to wait and see how things played out before proceeding. Some people though decided to take advantage of the opportunity and were able to finally purchase a home now that there wasn’t so much competition. That was a great choice because people who waited, unfortunately, saw mortgage interest rates rise more and more. In fact, from the beginning of 2022 to the end, mortgage interest rates more than doubled. Maxing out at just over 7% this made a significant drop in home affordability and priced many people out of the market. On the bright side, we did see some relief right at the end of the year with rates dropping to the mid 6% range.

Anxious Sellers in a Seller’s Market

Real estate in 2022 began to see homes sitting on the market longer due to the increased mortgage interest rates and people’s reluctance to buy. This was very unnerving to many sellers who wouldn’t have batted an eye at the fact that their home didn’t have any offers after 2 weeks on the market. But perhaps more rattling to them than the lack of offers in the first week was just how quickly it became the reality. One day your neighbor is getting multiple offers in the first couple of days and the next 2 or 3 weeks would go by before getting your first and only offer. Needless to say, the real estate market in 2022 was very stressful for sellers even though we were still in what would historically be considered a strong seller’s market.

Prices Drop But Equity is High

Since homes were sitting on the market for longer, we saw something we hadn’t in a few years, price drops. These price drops helped to somewhat restimulate the market and the buyers who were looking for a good deal, started to come out again. Many worried when they saw the price drops that it was proof that the market was in fact in a bubble. However, this in fact has proved to not be the case and was simply a market correction. Between 2020 and 2021 home values went up 20%. The slight decrease in value experienced in 2022 is a far cry from a housing bubble or the crash of 2008. Home values are still significantly higher than they were a year ago and equity values remain the strongest in history.

Overall, real estate in 2022 was challenging and at times frustrating, but in a completely different way than 2021. Our changed perspectives from the 2021 market only amplified the stress of the quick-changing reality. It just goes to show that anything can happen in real estate, but when purchased wisely, real estate is always a smart investment.

Thanks for reading!

MI Home Team Realtors