Newsletter
Where else could we possibly gather together with family and friends over a turkey dinner? This Thanksgiving, despite the ups and downs, we have so much to be grateful for - especially when it comes to the 2022 housing market that’s allowed us all some greater opportunities.
Why Should You Be Optimistic About the 2022 Housing Market?
The housing market hasn’t been this strong in a while. Here are the factors that have triggered such a favorable environment:
Average Home Prices Are Down by 2%
The median national property price dropped to $425,000 in October. It might not sound like much, but it shows the housing market is moving in the right direction. Overall, the prices this year grew by 13.3%, nearly 5% lower than in 2021.
The same report shows that the number of houses whose prices dropped grew from just over 10% in 2021 to 20.9% in October 2022. This share is well above the 2019 (17%) and 2017 (18%) levels. Home buyers throughout the country should be thankful for the positive trend.
There’s Been an Increase in Inventory
Besides lower prices, you can now also choose from more houses when buying your property. The number of listings grew more than 20% compared to last year. The housing inventory hit rock bottom in 2021 and early this year, but the active listings have been soaring lately.
During the coronavirus pandemic, people were reluctant to sell their houses, but this has changed. There’s a wide selection of homes for sale, with unsold inventory being 5.2% higher than one year ago.
This housing supply growth should prevent a dramatic sales slowdown and further reduce the price growth that took place last winter due to limited inventory. If the trend continues, demand will be consistently met, and price growth will be kept in check.
Although it seemed unlikely at the start of 2022, new-house construction has been picking up since June, bringing more and more homes into the market. For instance, the number of new single-family homes rose more than 4.2% in October, reaching nearly 700,000 units. This is the highest level new construction has been at since 2013.
Adjustable Mortgage Rates Are More Common, Opening Endless Doors
Adjustable-rate mortgages (ARMs) have become exceedingly popular since 2021 for several reasons. Primarily, they allow you to modify your mortgage loan interest rates, giving you more options when buying a property and may even save you a lot of money. They’re especially convenient if you don’t plan on staying in your house for a while.
There are many ways you can gain from ARMs in today’s housing market:
Lower Interest Rate Initially
Some of your financial goals include stability, reduced debt, and high cash flow when taking out an adjustable mortgage loan to buy a house. All of which is available if you choose an ARM. The arrangement has a low initial interest rate, making it more affordable due to lower installments.
Likewise, this type of mortgage alleviates debt burden because you don’t have to pay a considerable amount of money in interest. However, you can avoid getting indebted by making large payments initially since the interest is lower.
The initial ARM savings can help you afford a more luxurious or bigger home than a fixed-rate mortgage loan. You might also be able to refinance your loan when market conditions and rates improve.
More Options
Let’s assume you’re shopping for different types of mortgage loans to finance your house. In this case, you can focus on ARMs, which come in various forms. This enables you to select the least burdensome option.
For example, you can take out an interest-only ARM to limit your exposure. As the name suggests, this solution allows you only to pay your interest during a specific period. Once the timeframe ends, you continue to pay the principal and any accrued interest. This method is incredibly convenient when purchasing properties since it lets you stabilize your finances before you start repaying the interest and principal together.
There are many other types of ARMs, but the principle is the same – you get tremendous convenience and customizability. Even though they’re not for everyone, ARMs work wonders if you need increased affordability and flexibility early on.
Mortgage Rates Are Still Low, With Rates in the 89’s at 18%
You may have been bombarded by headlines claiming housing rates are on a sharp increase. While the media isn’t wrong, they can sometimes hyperbolize their headlines and mislead you. Rates have risen compared to 2021, but there’s no need to panic. In fact, rates are quite low in historical terms.
Surprising as it may sound, the average mortgage loan rate has been 7.76% since 1971. You might think the low rate is attributed to decreased rates in the 1980s, but that’s not the case. Average mortgage loan rates were over 18% in this period.
Therefore, we’re still maintaining a historical average despite interest rates rising this year. It’s hard to say where the number is headed in 2023, but you can be thankful for the current trend.
Financial Tech Has Advanced Significantly, With Everything You Need to Become a Homeowner at Your Fingertips
Financial technology (fintech) has evolved in the last few years, which is particularly important for home buyers in 2022. Rather than plow through piles of documents, you can become a homeowner from your phone or computer. Coupled with ARMs, this provides unrivaled convenience and drastically reduces the time it takes to buy a property.
Here are some of the most amazing fintech features:
Streamlining the Mortgage Loan Process
If there was a banking activity related to the housing market that needed digitizing and modernizing, it was the mortgage procedure. It used to be cumbersome and time-consuming, putting you off buying a house. Now that the process has been mostly transferred online, you provide less paperwork, enjoy smoother approval, and gain access to lower interest rates.
Online and digital lenders, such as OnDeck, can make their services more affordable due to lower overheads, including employees, office space, and other costs. This is a win-win for you and them when processing a home purchase.
In addition, you’re less likely to be denied a loan due to an optimized process. Institutions like Quicken Loans take just around 10 days to analyze your application and 15 days to consider your refinancing. As most of this is automated, lenders handle a large number of applications and typically approve more people since there’s no frustration caused by paperwork.
Better Risk Management
Another reason you should look forward to the upcoming developments in the housing market is that fintech offers better risk management. In real estate, this refers to determining, managing, and evaluating risks that can arise from buying a certain property. Thanks to robust tools that rely on machine learning, you can now enter into your mortgage loan agreement more confidently.
Real-Time Financial Information
You’ve probably relied on intuition when making a financial decision. There’s no need to do so anymore because fintech platforms lay down all the variables in front of you when buying a property.
This variety of data sources has become essential. You can use a host of apps to identify trends and patterns and make an informed decision. Some of the information you can access with this software includes:
- Surveys
- Smartphone signal strength
- Change in the number of local stores and coffee shops
- Permits for various amenities, like swimming pools
- Median age and crime rate
Many other variables can help you make a long-term market projection and determine if you should break into a particular market.
Keeping Up With Modern Trends
Letting technology and AI do most of the work has become the norm in all areas of life. You’re used to mobile and digital platforms, so you expect sellers and lenders to offer this convenience. Luckily, most of them have responded to your need.
The key players in the housing market have reduced manual work and streamlined your customer journey. This can motivate you to buy a property in the upcoming period.
Great News for Future Home Buyers
Owning a home has never been easier, and for that, we say thanks. Happy Thanksgiving folks!
Mortgage Calculator
Home price
$
Down payment
$
%
Length of loan
Interest rate
%
Homeowner's insurance
$
Property tax
$
HOA fees
$
$1,337.65
Monthly Payment
Article Topics
Mortgage Loans
Matthew is a freelance financial copywriter with 14+ years in financial services. He holds a Bachelor of Science degree in Economics with business and finance options and is a CFA Charterholder. He is from Vancouver, Canada, but writes from all over the world.
