Home prices continue to rise and mortgage rates appear ready to follow. Some skittish buyers are jumping into the market now, fearful what could happen if they wait.
NEW YORK – After registering month-to-month gains of over 1% starting in September 2020 and reaching a high of 2% in July 2021, the increase in U.S. home prices appeared to slow down in the fall. But a rapid home value appreciation has reignited just ahead of the spring homebuying season, jumping from 1.2% in November to 1.4% in December, according to a new Zillow report.
Experts are blaming the return of big price gains on historically low levels of housing stock and a rush by buyers to beat a rise in mortgage rates.
Buyers in December had 19.5% fewer homes to choose from than a year earlier when inventory was already at a record low. And compared with December 2019, they found 40.5% fewer homes available for sale.
“It is a hint to us that perhaps the spring homebuying season is coming early,” says Alexandra Lee, an economist at Zillow. “We would usually expect the winter months to still be relatively slow. But with this re-acceleration and understanding just how hot the market has remained over the last year, the housing market is starting to heat up earlier than usual.”
Total housing inventory at the end of December amounted to 910,000 units, down 18% from November and down 14.2% from one year earlier (1.06 million), according to the National Association of Realtors.
The rise of the omicron variant of the coronavirus could be partially responsible, pushing homeowners to wait for infection rates to subside before listing, experts say. The uncertainty around long-term working arrangements could also play a part in keeping inventory low.
Home prices keep rising
A December survey conducted by Zillow found that 52% of workers reported that their employer had announced post-pandemic work arrangements – a lower share than was reported in June 2021. That is likely due to the rise of new coronavirus variants causing employers to push back in-person start dates.
The median existing-home price for all housing types in December reached $358,000, up 16% from December 2020 ($309,200), as prices rose in each region. This marks 118 straight months of year-over-year increases, the longest-running streak on record, according to the National Association of Realtors.
In 2021, existing-home sales totaled 6.12 million – an increase of 8.5% from the prior year and the highest annual level since 2006.
Properties typically remained on the market for 19 days in December, fewer than the 21 days in December 2020. Seventy-nine percent of homes sold in December remained on the market for less than a month.
Lawrence Yun, the National Association of Realtor’s chief economist, believes the expectation of rising mortgage rates could be forcing buyers to jump into action sooner than usual.
Mortgage rates hit their highest levels since March 2020. The 30-year-fixed rate reached 3.56% for this week, according to Freddie Mac.
“One can say that there are some people who want to jump in before the interest rates rise even more strongly,” he says. “We will get more inventory throughout the year but some of the buyers will be priced out because of higher interest rates.”