A year ago, a prospective home seller put up a “for sale” sign in their yard for a few minutes. The housing market continued to boom during the pandemic as Americans moved to places where they could have more space and lower costs. Due to the lack of inventory, bidding wars were rampant throughout the country.
Due to the rising interest rates and the deteriorating economic situation, the housing market is expected to decline in 2022, according to a report released by real estate firm Zillow. It projects that the number of homes that will be sold will decrease by 14.1% to 5.3 million. In July, the company reported that the number of mortgage applications decreased significantly.
Inventory on the Rise
The traditional fall and spring selling seasons are over, so families are waiting to put their houses on the market before the school year begins. This year, the market is being “rebalanced” due to the various factors that have affected it.
After experiencing a spike in inventory during the pandemic, the housing market is starting to return to more “normal” conditions. This means buyers are less likely to spend a lot of time and effort trying to get their offers accepted.
The spring and fall selling seasons are over, so the demand for real estate will continue to decline. This will give homebuyers more opportunities to choose from a more comprehensive selection of homes during the rest of 2022.
Mortgage Rates
The rising inventory is also caused by the increasing interest rates caused by the Federal Reserve’sReserve’s actions to fight inflation. The average rate on a 30-year fixed-rate mortgage was 5.62% in June; then, it went down to 5.22% in August. During the previous two Augusts, the rate had been below 3%, which triggered the buying frenzy.
The rising interest rates will continue to affect the demand for real estate. As a result, the number of homes on the market will increase, leading to more negotiation leverage for both buyers and sellers.
The low-interest rates caused by the Covid acquisition have increased the number of buyers and sellers. If the Federal Reserve continues to increase the rates, this will cause more negotiation leverage to shift from the sellers to the buyers. In August, the inventory growth slowed down. This will affect our projections for the rest of the year.
Tax Breaks
If you’re a first-time homebuyer, make sure that you take advantage of the tax breaks that are available to you when you become a homeowner. One of the essential factors that you can consider is the mortgage interest and property tax deduction. These two can be used to reduce the amount of income that you owe.
One of the most critical factors you can consider when it comes to reducing the amount of income you owe is the tax deduction for the payments you make before the loan closes. This can make a massive difference in the amount of money you owe at the end of the year.