This Month Is Expected to Be the Most Competitive Month in Housing Market History

You knew the housing market was hot, but the hottest of all time? Apparently, yes.

A new report out from real estate brokerage Redfin reveals that January is “shaping up to be the most competitive month in housing history.”

While potentially great news for home sellers, it’s the worst thing a prospective home buyer wants to hear right now.

Further exacerbating this bittersweet news is the fact that mortgage rates have started 2022 off with a bang.

The one silver lining is that demand is expected to wane if mortgage rates continue to creep up, though I’m not so sure.

What the Heck Is Going on in the Housing Market?

In a nutshell, the same thing that was happening in 2021 and 2020. There is a serious lack of housing inventory and a lot of demand to buy a home.

Together, this continues to propel home prices to new heights, with the median home sales price hitting an all-time high of $365,000 during the week ended January 9th.

That’s up a big 16% from a year ago, while the median asking price of newly listed homes is up 12% to $344,190.

Concurrently, the number of new homes to hit the market fell to a new low and began 2022 at a slower pace than 2021, off 11% from last year.

Meanwhile, active listings (homes listed for sale at any point during the period) plummeted 28% year-over-year, hitting an all-time low of 461,000.

And, the Redfin Homebuyer Demand Index surged 9% to kick off the year, and is up 22% from the same time last year.

They measure demand by tallying home tour requests and other home-buying services from Redfin agents.

Simply put, the spring home buying season started early this year, basically on January 2nd.

So if you’re in the market to buy a home, prepare yourself and get ready for battle.

Will Higher Mortgage Rates Cool Demand?

Now a sliver of hope, maybe. Redfin Chief Economist Daryl Fairweather noted that home buyer competition would fall to levels similar to late 2018 if the 30-year fixed hits 3.6%.

Per Freddie Mac, the most popular home loan program averaged 3.45% for a typical conforming loan amount at 80% LTV or less.

It seemed like mortgage rates were already at 3.625% this past week, though they appeared to finally take a breather.

Either way, I’m not so sure I agree with Fairweather here, even though I assume her opinion is backed by lots of data and machine learning.

Human psychology can’t always be measured with such accuracy, and something tells me the threat of rising mortgage rates will push more folks off the fence.

After all, if they believe their low mortgage rate is also going away, they’ll want to act even quicker than before to at least lock that in.

Yes, some could get priced out of the market due to higher interest rates, but for the many who remain it could further exacerbate this crazy housing market.

Set Your Price Filters $100,000 Lower Than What You Can Afford

Here’s a tip to help navigate this awful market for home buyers. Set your price filters way lower than what you can afford.

For example, if you obtained a mortgage pre-approval that says you can afford an $800,000 property, punch in $700,000 on Redfin, Zillow, etc. for your maximum purchase price.

That way when the home invariably goes way above asking, you’ll actually be able to afford it if you get into a bidding war and win.

It’s no joke – a Portland Redfin real estate agent said home buyers are offering $100,000 over asking, waiving contingencies, and still losing…“to 9+ other offers.”

Obviously some housing markets won’t need such large adjustments, but research the one you’ve got your eye on and adjust accordingly.

Redfin also noted that 29% of homes that went under contract during the four-week period ending on January 9th had an accepted offer within a week of hitting the market, up from 25% a year ago.

And properties that sold were on the market for a median 27 days, down from 35 days a year earlier.

Lastly, 41% of homes sold above their list price, up from 33% at this time in 2021, and the average sale-to-list-price ratio was 100.3%.

In other words, the average home is going for 0.3% above its list price. And sellers aren’t exactly listing low…

Oh, and next month will probably be even worse.