January 2022 saw record home sale prices set as we started the year out with a bang. Median home sale prices rose to $413,500 from $327,250 last year. That is a whopping 26.4% increase over last year. Average home sale prices rose to $574,393 from $489,738 last year. That is a 17.3% increase.

We did notice a drop in average sale price from December. Last December averages sale prices were $605,784. We do not get too hung up on average sales because a few large sales can skew the average. Therefore, median is most used. For instance, the Ellis Team closed one for about $3.8 million in December that would skew the numbers up on the average.

Inflation and Housing Prices

What effect will rising rates and inflation have on housing prices?  That is what we are going to watch. Typically, the Fed raises rates to slow down the economy.  An overheated economy leads to inflation which hurts the most vulnerable among our population. The Fed is determined to stop rising inflation with a series of rate hikes and elimination of the bond buying program that has infused so much into our economy. This will take money out of the money supply which will serve to slow down the economy and also make rates rise.

Where it gets tricky is the global economy. In the old days the US would raise rates and that would be that. Today we no longer live in a bubble and have to look at how the dollar stacks up against foreign currencies and economies. It could be that foreign governments choose to invest in US Treasuries which would pull rates back down. Keep in mind there is an inverse relationship with prices and yield, so as the price goes up the yield goes down. It will be interesting to watch how much interest rates will go up.

Price of Oil

The other wild card is the price of oil. Rising oil prices can be inflationary. We have a graph that shows key moments in history where when oil reached a certain point it led to recession. We are no super economist, and you know what they say about economists. It just feels like to me if oil were to hit $115/barrel or so it would not be good for our economy. As I write this article West Texas Intermediate crude oil is just above $94. We will be watching this number closely along with the price of the 10-year treasury yield.

Many sellers are holding out for higher prices, and their hunch to this point has been good. Nobody knows how much longer prices will increase. We also do not know how fast or how much interest rates will increase. We would say the cost of borrowing is set to go up. Rates have risen in the last year, and we expect more of that. If your home does not fit your needs, making a move today may be in your best interests. Waiting to make the move when borrowing costs are higher can cost you in two ways.

Interest Rates

If you are getting a mortgage on the next house, your borrowing costs will be higher by waiting. Secondly, all the buyers looking at your home will now qualify for less home when rates rise. For every 1% rise in rates takes away 11% purchasing power from borrowers. This means the pool of buyers for the home you are selling could shrink as well.

The good news is today we have more buyers than sellers. It is always more fun to sell in this environment. In the future we may not have quite the imbalance, which wouldn’t be as fun. Waiting can be a gamble.

If you’d like to discuss your options, call Brett or Sande Ellis 239-310-6500. We can consult and give you answers to your questions. Or visit www.SWFLHomevalues.com to get your home’s value instantly.

Let us know how we can help. We are easy to talk to, so we look forward to hearing from you.

2021 year end sales prices ended up at $360,000 median sales price and $506,033 average sales price.  The year end median sales price rose 24.6% while the average sales price rose 28.2%  The year end sales price is an average of all the sales that occurred in that year and is compared to the average the previous year.

Last week we wrote about how December median sale prices rose 27.6% over 2020.  It is always interesting to view the month price change in context with the yearly price change. It appears home prices sped up in the 4^th qtr. which helped propel the yearly to the 24.6% price gain.

The question becomes, will the rapid price growth continue or will prices stall? We saw institutional investors come into the market and buy up as much inventory as they could.  They turned these properties into rentals and raised the rents. This put pressure on renters and first-time home buyers alike.

With Wall Street reaching record highs and retreating, will institutional investors keep paying top dollar for residential real estate going forward? They may, but if the economy turns in the 2^nd half of 2022, they may not be willing to spend as much.  If institutional investors pause buying and normal buyers are hit with recession, the real estate market could become interesting.

Florida sits in a better position than many states, but you must wonder if homes become harder to sell up North, will the money keep flowing to Florida like it has in years past?  Even if money does continue to flow, at what rate?  Will we see 25% price gains going forward?

25% appreciation rates are unsustainable, and if you have them for too long it is a matter of time before things go back the other way. Some sellers are questioning whether now the time is to sell.  The answer is probably homeowner and situational specific. Additionally, nobody knows how much more upside is left in this market and for how long.

All we can say is it is more fun to sell right now than buy. Listing inventory is low. Sellers usually wait to sell until they see the market turn, and by then it is too late.  Have you ever heard the term “You never want to catch a falling knife”? Buyers do not like to buy when the market is falling. They prefer to wait when the all-safe is given, which means the market begins to go back up.

Some people will always need to buy, and others will always need to sell no matter what the market is doing.  It is the discretionary seller that may be holding out for one last sign the market is peaking. Stock analysts always advise not to time the market. Rarely will you get it exactly right, and only in hindsight will you know if you did.

If your home does not work well for you, or if you have better uses for your equity, now might be the time to explore your options. Do not sell just because the market is high. Have a plan. Who knows, the market may go higher in 2022. However, do not hold something that doesn’t work for you simply because the market went up in the past.  Just because it went up last year does not mean it will go up this year. If your home is not ideal for you, let’s sit down and talk about your options.

Call Sande or Brett Ellis 239-310-6500, or visit www.SWFLhomevalues.com to get an Instant and Free online valuation.

We can discuss your options and help you make better decisions for your family.  This may be a generational wealth decision for your family, so let’s get this decision right.

Good luck and Happy Buying and Selling!

January 2022 State of the Market Video