Buying, Selling, or Renting in 2022? Here are some things to consider.
Updated: Jan 31
Here are some things to consider when the world is still dealing with COVID-19, record inflation rates, and now, a Russo-Ukrainian war.
by Carolina I. Nunez, Esq.
Surely, by now, you have logged on your social media accounts and have seen several posts of those that are frustrated that they have been searching for a home and have not had an offer accepted. You may have also seen others post about how their rents are increasing to a rate they can no longer afford. There may be others that have reached a point where they may have had to move back in with their parents.
The housing market has become a serious problem from 2020 to 2022. According to the Standard and Poor CoreLogic Case-Shiller U.S. National Home Price NSA Index, there has been an 18.8% annual gain in home prices in 2021. This increase has been the highest reported in three-decades. Economists at Zillow Research are now noting that they believe that the prior forecasts were conservative. They are now predicting home values are to increase 4.1% in the first quarter of 2022, with a total increase of approximately 16.4% by the end of 2022.
It is not just home prices that have seen an upward trend—as of today, the 30-year fixed mortgage rate jumped from 3.69% last week to 3.92%. Mortgage rate increases have also fueled the buyer frenzy as buyers felt as though they needed to buy as soon as possible rather than wait for mortgage rates to
increase to a point to reduce their buying power. According to the Mortgage Bankers Association, mortgage applications increased by 4.3% during January despite the rising mortgage rates.
Aside from low inventory, COVID-19 has impacted personal lives as well as the
financial stability many individuals and families had. From furloughs, unemployment, or the reduction of working hours – COVID-19 has taken its toll. Two years since the beginning of the pandemic, many Americans may feel as though having a predictable monthly mortgage payment would provide stability and the ability to earn equity. Additionally, with U.S. inflation surging and currently sitting at a 7.5% annual rate, many may find that securing a home is now more important than ever, especially if they are renting. For those that are renting, prices have increased significantly in just a period of a year. Some rental markets have increased an average of 19.3% from December 2020 to December 2021. To make matters worse, in metropolitan markets, such as Miami, median rents increased 49.8% in a year.
As of yesterday, inflation numbers may become more alarming for consumers. Overnight, Russia began its invasion of Ukraine. While this may seem as an overseas problem to many, the implications of a war on the global market will affect our daily lives here at home. Currently, economists have noted that some economic models predict that inflation will increase even faster to a rate of 10%.
What does this mean for you?
With the housing market inventory being low, sellers are likely dealing with multiple offer situations, also known as bidding wars, where buyers are willing to forgo important contractual clauses to have their offer accepted. Buyers are willing to pay well-over asking price, waive appraisal contingencies, and in some situations—even offer to waive inspection contingencies.
While this sounds great for a seller, the situation can become complicated relatively
quickly. Sometimes, after executing the sales contract and the buyer placing the earnest money deposit – they may run into situations where appraisal is significantly higher than they expected, problems with the inspection are greater than anticipated, or loan financing terms have become unfavorable for the buyer. If you have picked an offer that waived all of these contingencies, you may find yourself risking running into a buyer wanting their earnest money deposit back. This is where escrow disputes begin.