The Charlotte Area Real Estate Market Going Into 2022

We thought we would take a break from our recent exploration of the Charlotte metropolitan area to briefly explore expected real estate market conditions in the region going into 2022.  Home sellers and home buyers alike have expressed some reluctance to enter the market for logical reasons.  Sellers know that home prices in the area have reach historic highs, but they are concerned that selling into this hot market may leave them with few alternatives for a replacement home, with the prospect of paying top dollar for it.  Home buyers continue to experience the frustration of being outbid by multiple competing buyers for a limited inventory of homes, thereby pushing prices to seemingly irrational highs.  Both concerns are reasonable. 

 

Economists at Fannie Mae project that a rise in mortgage interest rates is likely, as inflation continues to escalate in the United States.  Tightening monetary policy will likely cause interest rates to increase beyond the lows enjoyed throughout 2021, although the increase will probably be slow and gradual.  Rates are likely to remain under 4% in 2022.  “Even a modest tightening of monetary policy would, of course, impact housing, but we expect the effects to be largely muted given current market conditions,” said Doug Duncan, Fannie Mae’s chief economist. The market conditions he was referring to are the low inventory for homes for sale, which continues to put upward pressure on prices.

 

For sellers who are considering downsizing—usually older homeowners who may not have updated their homes in some time—these market conditions offer real opportunity.  Today’s high offers are frequently accompanied by large “due diligence fees”—non-refundable deposits paid directly to sellers to compensate them for taking their home under contract and therefore effectively off the market.  Large due diligence fees give sellers leverage to decline repair requests or requests to reduce the contract price of the home to compensate for repairs purportedly needed after home inspection.  Buyers are unlikely to walk away from $5,000… $10,000 due diligence fees when the seller declines repair requests.  This makes it possible for a seller to get top dollar for their home, while not having to make repairs or updates.  As long as the seller is downsizing and probably doesn’t mind moving toward the outside of the metropolitan area, the windfall received from the sale of their home can be reinvested in a smaller property in an area where prices are not quite as inflated—such as Concord, Kannapolis or even Salisbury.  This can represent a great strategy for preparing for retirement.

 

No one is expecting a collapse of housing prices in 2022.  Fannie Mae acknowledges inflationary pressures, supply chain issues effecting building materials, and a continuing low inventory of resale homes, but none of these things are expected to seriously impact housing prices downward.  So buyer strategy should rely heavily on researching the current market value of each home the buyer is interested in to make sure their offer does not result in an irrational effort to “win” a bidding war that causes the buyer to overpay significantly for a home.  A clear head, perseverance and a real estate agent who is capable of competently estimating current market value of a home are all key elements of that strategy.  With mortgage interest rates remaining relatively low and housing prices continuing to rise, patience and perseverance will result in the buyer being able to get onboard the housing market train as it is projected to continue to rise through 2022.

 

To summarize, while overall economic growth is expected to falter in 2022 due to inflationary and supply chain pressures, few economists project a decline in housing prices.  The market fundamentals remain too strong.  Growth in prices may slow as mortgage interest rates gradually rise, but very few experts are predicting any sort of housing bubble or collapse.  There are always strategies for dealing with this sort of market, depending on the individual seller or buyer circumstances and goals.  As our company motto reflects: It is always solid analysis that identifies great opportunities.  No sound investment is likely to come from a “one-size-fits-all” approach.  Some sellers may be best advised to remain in their homes and allow the rising tide of home prices to continue to increase the value of their investments.  And some buyers may be better advised to rent for a year, rather than overpay for a home.  But sellers and buyers who establish well-reasoned goals and move forward based on sound research and analysis are likely to benefit from this market. 

For more information and the ability to search the entire Charlotte metropolitan area MLS system for homes, condos, townhouses and more, go to Eric Dorer Real Estate.