By JUDD MATSUNAGA, Esq.
Last year was great for selling a home but not a great year if you were trying to buy one. The story of 2021 was how quickly home prices accelerated. Home prices rose sharply and the number of homes for sale declined. According to the National Association of Realtors, the national median home price hit an all-time high, e.g., $362,800 in June.
Chief economist at the National Association of Realtors, Lawrence Yun, said the housing market may “normalize” in 2022. “All markets are seeing strong conditions, and home sales are the best they have been in 15 years,” Yun said. “The housing sector’s success will continue, but I don’t expect 2022’s performance to exceed 2021’s.”
Yun projects that mortgage rates will increase to 3.7% in 2022, pushed up by persistently higher inflation. He said sales may decline this year but predicts that they will exceed pre-pandemic levels. His forecast is based on an expectation of more inventory in the coming months. The increased supply will be generated from new housing construction and the end of mortgage forbearance, a situation that will cause some homeowners to sell.
According to Redfin data, the typical home sold in 15 days last year, and more than 60% went off the market in two weeks. “The ongoing pandemic, including its seismic effect on the U.S. economy and the way Americans live and work, has made 2021’s housing market anything but typical,” said Daryl Fairweather, Redfin’s chief economist.
“2022 will bring more balance to the housing market. But don’t expect a buyer’s market; just more selection, less frenzy and slower price growth,” Fairweather said. “We will see a rush to buy homes at the start of the year before mortgage rates rise. That early onslaught of demand will deplete the supply of homes for sale. In the second half of the year, a much-needed increase in new construction will boost sales slightly. In 2022, there will be 1% more sales than in 2021, and by the end of the year, home price growth will slow to 3%.”
She continued, “Remote work, low mortgage rates, a shortage of building materials and wealth inequality that has allowed an influx of affluent Americans to buy vacation homes, to name just a few factors, have come together to create a historic year for real estate. Buyers paid more for homes, bought sooner than they planned, searched outside their hometowns or all of the above.” (Source: Washington Post, 2022 Housing Market Predictions, Jan. 10, 2022)
Realtor.com, the real estate listings website, says that home buyers will have a better chance to find homes in 2022 but will face a competitive seller’s market. “Affordability will increasingly be a challenge as interest rates and prices rise, but remote work may expand search areas and enable younger buyers to find their first homes sooner than they might have otherwise,” said Danielle Hale, chief economist.
Hale says sales of existing homes will rise 6.6%. She expects 2022 to have the second-highest sales in the past 15 years, surpassed only by 2021. Hale predicts the price appreciation for existing homes will be 2.9%.“Affordability challenges will keep prices from advancing at the same pace we saw in 2021 even as ongoing supply-demand dynamics mean prices continue to grow nationwide,” she said.
“Hispanic home buyers are already a sizable share of the housing market, comprising more than 1 in 10 recent home buyers, yet still underrepresented relative to their roughly 1-in-5 share of the U.S. population,” she said. “This demographic group is expected to play a growing role in the home-buying market.”
Economists at Zillow, the online home sale marketing company, say the housing market may not reach the incredible heights of 2021, but they expect it will be anything but slow. Zillow’s forecast calls for 11% home value growth in 2022, down from a projected 19.5% in 2021. It expects sales of existing homes to total 6.35 million, up from an estimated 6.12 million in 2021.
The Zillow economists say the market forces that have given sellers the upper hand over the past two years or so — tight supply after years of underbuilding, and elevated demand because of remote work, U.S. demographics and low mortgage rates — will persist this year. They expect bidding wars on many homes, especially as the market heats up during the spring and summer shopping season.
Because Americans are taking advantage of remote work flexibility to move to larger homes in more-affordable markets, the Zillow economists predict that more Gen Zers and millennials will upgrade their existing homes rather than try to wade back into the market to trade up their primary residence. Therefore, they predict that the renovation boom will continue.
Here’s my point. Don’t be fooled by all the “fake news” or “fake forecasts.” Every so often a family comes into my office after the loss of a parent. They would say, “Mom and Dad are both gone, their home is in the trust. We want to sell it but want to clean it up first. We read that the real estate market should continue to stay strong in 2022. We should be ready to sell this summer in 5-6 months.”
As an estate planning attorney, a real estate broker, and a real estate investor (who lost money in the last 2008 recession), here’s how I would respond. Selling real estate is all about timing. The real estate market is cyclical. There are good times to sell, and there are bad times to sell. Every 8-10 years there’s a “market correction,” some would call it a “crash.” The last real estate market crash, i.e., “bubble burst,” was in the 2008-2009 Great Recession. That means we’re overdue for another crash.
In fact, the very same things we were hearing right before the Great Recession in 2008, we are hearing now. Turn on your news. Stock market at record highs. Interest rates at record lows. Banks are offering “easy-qualifying” or “no-qualifying” loans to artificially keep the real estate market from crashing too soon.
I graduated from UCLA with a bachelor’s degree in economics. They taught us about business cycles. But they didn’t teach us that these “market corrections” are done by design. The people who control the Fed, the people behind the politicians, want the market to crash. You say, “But Judd, if the market crashes, won’t the rich be hurt too?”
No, absolutely not. That’s what they would like you to think, e.g., “Look at all those big banks who lost money when thousands of homeowners defaulted on their loans.” No — the big banks got bailed out by the American taxpayer. Every time the market crashes, the wealth gap between the top 1% and the 99% gets wider. A real estate market crash is coming by design. So is the stock market crash.
You remember Robin Hood, the legendary heroic outlaw originally depicted in English folklore who robbed from the rich and gave to the poor. Well, the sad truth is that every so often, 8-10 years on the average, the rich steal from the poor. I heard one TV show where Jesse Ventura, retired professional wrestler and former governor of Minnesota, interviewed a member of elite 1% who said, “It’s time for the fleecing of the sheep.”
Don’t believe me? According to CBS News (Jan. 16, 2022), inequality is now reaching “outrageous” levels, according to anti-poverty charity Oxfam. The world’s 10 richest billionaires have doubled their fortunes from $700 billion to $1.5 trillion — at a rate of $15,000 per second or $1.3 billion a day — during the first two years of the pandemic.
If you’re interested, according to Forbes figures cited by Oxfam, those men are: Elon Musk, Jeff Bezos, Bernard Arnault and family, Bill Gates, Larry Ellison, Larry Page, Sergey Brin, Mark Zuckerberg, Steve Ballmer, and Warren Buffet.
According to the article, it’s not only the nation’s billionaires that have enjoyed huge growth in their fortunes. The number of households in the U.S. with wealth of more than $50 million surged more than 70% to 63,505, from 2016 to 2021, Oxfam found. Their combined wealth jumped more than 50% to $12.8 trillion.
During this same time, the bottom 99% of humanity — including middle- and lower-income households — lost income during the crisis due to layoffs, economic uncertainty, and increased caretaking due to closed schools and illnesses caused by COVID-19, the group said in a new report.
In conclusion, if you’re thinking of selling your home, I’d suggest you put your home on the market “yesterday.” Don’t wait until you clean it up or fix this or fix that, so it “shows” better. If you wait 6 months, the interest rates could rise, the stock market could crash, the real estate market could “crash.”
Right now the real estate market is “hot” because of low inventory and buyers are trying to lock in low interest rates before they go up. If you’re thinking of pulling money out of your home, do it now while interest rates are still at near historic lows. Finally, if you are heavily invested in the stock market, you may want to diversify your portfolio. A crash is coming — it’s done by design.
Judd Matsunaga, Esq., is the founding partner of the Law Offices of Matsunaga & Associates, specializing in estate/Medi-Cal planning, probate, personal injury and real estate law. With offices in Torrance, Hollywood, Sherman Oaks, Pasadena and Fountain Valley, he can be reached at (800) 411-0546. Opinions expressed in this column are not necessarily those of The Rafu Shimpo.