The Real Estate Crash of 2022
Is the Real Estate Market Going to Crash in 2022?
It’s not as much of a seller’s market any more, but it’s still a seller’s market. There isn’t much for sale, and there aren’t many people who can afford buy it. I think the market is going to simply lock up. Inventory is incredible low, and affordability is also incredibly low.
I think this market is going to just lock up. There will be very few sellers, very few buyers, and very few deals. The market is still working, but the amount of people who can afford to participate in this market is just much smaller. The number of transactions is going to drop and continue to drop. The number of REALTORS is also going to drop.
Let’s Look at Inventory
Inventory is slowly rising in Sussex County, but the number of new homes listed in May 2022 is actually lower than May of 2021. There just isn’t much for sale.
To give you a perspective on the market- in June of 2022, there are about 1200 residential listings in the Sussex County, DE MLS. In June of 2018, there were over 4,100 residential listings in the Sussex County MLS. That’s a massive difference, and a massive decrease in inventory. The market in 2018 wasn’t bad. Inventory was already trending down at that time.
Interestingly, the number of closed units in 2022 was 561. In 2018, the number was 535. The market in Sussex County in 2018 was a healthy real estate market, and sales were about the same in total number of transactions.
Two huge things have changed
First, inventory has dropped. From 2010-2020, the average monthly inventory was 4,966. Inventory in May of 2022 was down 75% compared to historical levels from the last decade. This is astounding.
Second, prices have risen. The reality of Sussex County real estate is that there is still high demand for property. At the same time, inventory has been consistently dropping for years while demand has remained the same. Simple economics will tell you that when demand is high and supply is scarce, prices will rise. At this is exactly what has happened. Prices have risen dramatically in the last few years.
One More Variable:
Interest rates have basically doubled in 2022. In my 20 years in real estate, I’ve never seen rates rise so quickly. This has a dramatic effect on the market. First, it shrinks the number of buyers. People who are rate dependent can’t buy as much house. Some of these people will simply not buy- and so the number of buyers will continue to shrink as interest rates rise. Second, most sellers are also buyers as they sell one property so that they can purchase another. Some of these people just won’t sell because of their lost purchasing power as a result of interest rates. Rising prices generally doesn’t deter this tranche of buyer- they will sell high and buy high without any problem. The issue is when they can’t buy high because of interest rates being so much higher than they were six months ago. My theory is that inventory will stay low. People will just stay where they are. The market will slow down.
So where do we go from here?
This is still a seller’s market, but the days of price appreciation are largely over. We recently listed a house for $50,000 more than our market analysis. They received two offers in the first ten days. One was $25,000 over our market analysis, and the other was $15,000 over. They declined both offers. This property will probably sell close to our initial valuation, but the seller just hasn’t realized what’s going on in the market. This is a normal part of the process.
If you going to sell, it’s still a great time to sell, but the property needs to be priced to the market, and you’ll need to be patient.
If you’re looking to buy, this is a time to be cautious. Pay market prices and don’t take unnecessary risks. Prices will likely be flat to slightly down over the next year. I don’t see a crash like 2007 again- the mortgage world is nothing like it was before 2007, and the United States is underbuilt by millions of units for housing. The lack of inventory will continue, and there will not be a flood of distressed properties hitting the market like we saw in 2008-2012.
Get with an Agent you trust. If you’re selling, we know the market, and we collect lower fees than other agencies. Sunrise Real Estate can save you money. Selling is about walking away with the most money in the shortest amount of time. We’ve been in business since 2004.
If you’re buying, an experienced agent is the way to go. We are Zillow premier agents, and we’ve been helping buyers for 18 years. We know the communities, and we’ve help find $22,000 trailers and ocean front estates over $3,600,000. We provide the service that only comes from a small, local, independent firms. Google Sunrise Real Estate and read the reviews.
We’re here and ready to work for you.
Call Deniene 302-236-9092
Sunrise office phone- 302-313-9949