Real Estate News About The South Orange County Coastal Communities of Laguna Beach, Dana Point, San Clemente, Newport Beach, Corona del Mar, Newport Coast.
We hope this month finds you well. The residential real estate market is experiencing unprecedented low inventory levels. Please reach out to us with any real estate needs or questions. Amanda, Pamela & Jace
Look no further than Zillow. Back in December, the home listing site predicted that U.S. home values would climb 11% this year. Economists at Zillow now say that forecast is too conservative. Their latest forecast finds home prices are set to spike 16.4% between December 2021 and December 2022. If it comes to fruition, it would mark another brutal year for home shoppers.
Why is Zillow raising its 2022 home price growth forecast? A lot of it boils down to housing inventory. During the pandemic, inventory plunged to a four-decade low as more buyers rushed into the market. That trend was predicted to reverse late last year as forbearance protection programs lapsed and mortgage rates rose. But not only has that not happened, the inventory situation has gotten worse. In January, there were just over 923,000 U.S. homes listed for sale on Zillow. That’s down 40.5% from the pre-pandemic level in January 2020, and down 19.5% from January 2021.
Simply put: The housing market is tighter right now than it was last year when bidding wars climbed to an all-time high. That explains why Zillow foresees a rough few months ahead for home shoppers.
But there is a big wild card: As the Federal Reserve shifts policy to help tame inflation, it's moves will indirectly result in higher mortgage rates. In fact, the average 30-year fixed mortgage rate in January already spiked to 3.56%—up from 3.11% in December. That marks the biggest one-month jump in mortgage rates in more than nine years.
In the short term, more buyers might rush into the housing market in order to lock down rates before they go higher. But in the long term, higher mortgage rates would put downward pressure on price growth. Why? As mortgage rates rise, some buyers get locked out of the market altogether.
“Downside risks to our forecast remain,” write the Zillow researchers. “Elevated inflation heightens the risk of near-term monetary policy tightening, which would result in higher mortgage rates and weigh on housing demand…Higher rates are exacerbating buyers’ struggles with affordability, and they might dissuade some existing homeowners from moving, by raising the monthly mortgage cost of even those homes priced similarly to their current homes. By dampening both buyers’ and sellers’ appetite in this market, rising rates could drive down sales volumes this year, with uncertain effects on home prices.”
Homebuyers and sellers alike would be wise to take Zillow’s 16.4% price growth prediction—or any other real estate forecast model—with a grain of salt. After all, none of the major real estate forecast models predicted the historic home price boom we’ve seen over the past two years.
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JUST LISTED 996 Noria St Laguna Beach 3 bedroom corner lot home on a quiet street with ocean views Listed for $1,999,900 Multiple Offers Selling Over Asking 996Noria.com
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MARKET STATISTICS
Laguna Beach - February 2022
Active - 63 Pending - 48 Sold in January - 26 Under $1,000,000 - 0 $1,000,000 - $2,000,000 - 4 $2,000,000 - $3,000,000 - 6 $3,000,000 - $5,000,000 - 11 $5,000,000 - $10,000,000 - 2 $10,000,000 - $20,000,000 - 3
