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As the omicron surge continues, the question is how will this affect the real estate market in 2022? Prior to omicron’s appearance, the housing market was rebounding nicely. Yes, inventory remained low but consumer confidence was increasing.
A realtor.com survey in the spring of 2021 showed that only 10 percent of homeowners were considered selling; by fall that number had risen to 26 percent!
Most analysts don’t believe omicron will severely affect the real estate market in 2022.
Given the current state of the pandemic, it’s not surprising that many sellers are concerned about the number of would-be buyers touring their home. To help limit this, many are now requiring pre-approval letters prior to taking the tour in an effort to cut down on casual visitors.
Other homeowners are requiring pre-qualification letters, which are considerably easier to get.
Fair housing experts point out that if realtors are requiring pre-approval letters to tour a home, they must ask all buyers to submit proof or risk raising fair housing issues.
For those looking to buy or sell a home earlier in the year, the pandemic certainly has thrown all plans off track. However, there are still alternatives even as the market trends downward.
If you’re looking to sell, rest assured that there are still people moving to new jobs etc. looking to buy. Setting the correct price point is critical in this market.
Even if you can’t sell, historic low rates make this a great time to refinance as many qualification criteria have been relaxed.
According to a new report by Redfin, 27 percent of prospective homebuyers say they are looking to move out of their current metro area. New York, Los Angeles, and San Francisco all saw a net outflow of homeowners in April and May.
Certainly, the pandemic and work-from-home opportunities are primary factors as well as the high cost of living in many coastal cities.
Analysts point out that the trend out of expensive metro areas had already started before the arrival of COVID-19 but current conditions have accelerated the trend.
Despite all that’s going on in the Bay Area and the world – the coronavirus, high unemployment, social unrest – approximately 90 percent of Bay Area renters made their June payments or at least a partial payment. With nearly 5 million Californians out of work, stimulus payments, supplemental unemployment benefits and simply prioritizing rent seem to have gone a long way.
However, with some federal benefits due to end in July, there is considerable concern over what’s ahead. Currently, California lawmakers are considering allowing landlords to receive tax credits in exchange for forgiving rent. Tenants would have years to repay the debt and some may be eligible for debt forgiveness.
While many cities and counties have enacted eviction moratoriums to protect the most vulnerable, many of these measures are scheduled to end soon.
Not surprisingly, Californa experienced the worst month-to-month sales decline in April 2020 in over 40 years. The Bay Area saw the biggest decline in California with sales dropping 37 percent. While virtual tools have come in to play, the shelter-in-place orders and the lack of open houses has severely impacted Californa real estate.
Home prices dipped slightly although the difference between April 2020 and April 2019 is statistically flat. Most of the biggest declines were in high-end homes. Even with low inventory and decline interest rates, analysts expect home prices “to be tested” by the economic challenges currently facing the region.
As millions of Americans shift to remote work, the majority don’t have a dedicated home office but it’s now at the top of their wishlist. With the possibility of working from home even after the pandemic subsides, many homeowners are realizing that a repurposed dining room or bedroom is just not ideal.
According to Zillow, the number of online searches for home office space has increased by over 50 percent since May of 2019.
Likewise, sellers are emphasizing home office space in their lists 8.2 percent of the time, an increase of 10 percent over 2019.
The short answer is: who knows?
While many predicted 2020 would be a very strong seller’s market, the coronavirus has turned everything upside-down and all bets are off.
On the one hand, loss of income and the threat of more losses could keep the buyer pool much smaller this year. Since mortgage rates continue to be very low, this could indicate a buyer’s market for those comfortable taking the leap.
On the other hand, housing inventory continues to be low and home prices have not come down.
Seller’s market?
Some analysts see potential buyers delaying their decision for many months. If the demand does increase, expect prices to eventually rise 3% to 5%.
As the current pandemic continues to affect all sectors of the global economy, the overall effect on real estate has yet to be determined. To date, home listings have decreased by approximately 30 percent while asking prices have continued to decelerate. On the plus side, mortgage rates have dropped to an all-time low.
With a pause on open houses and in-person showings, real estate agents are using technology more-and-more to show properties. Video is now a dominant tool whether it’s virtual reality hoe tours, virtual neighborhood walks, and drones to convey a strong sense of place. Agents also use live streaming through social media to create excitement about a property. Virtual listing appointments can also be scheduled using Zoom.
Finally, a smart lock system allows buyers to visit a property when no one else is present by using one-time access codes through a smartphone. This can greatly increase the number of house showings.
Freddie Mac and Fannie Mae will give homeowners who are having difficulty with mortgage payments to defer payments for up to a year through forbearance. Homeowners will be required to make up any missed payments but they won’t be charged any interest and the payments will be added to the end of their term.
Already nearly 4 million homeowners have taken advantage of the offer.
Both Freddie Mac and Fannie Mae send that loan modifications might also be possible.
