Omicron, Inflation, and Rising Interest Rates…OH MY!
Heading into the final stretch of 2021, there were three of the big buzzwords heard across the US. Not coincidentally, this was due to an actual rise in all three. First, there was Omicron, a new variant of COVID-19 that spread across the country due to its being extremely contagious. This was even true for some who had been fully vaccinated against other variants, such as Delta. A year-end rise in cases and the fear of a post-holiday spike had everyone bracing for the worst.
Inflation and The Cost of Everything
Secondly, the debate surrounding whether inflation was transitory or long-term, played out with long-term winning, at least for now. In 2021, we saw inflation numbers at their highest in the last 31 years, rising to 7% in December. What did that mean for everyone across the country? It meant a rise in the cost of everything from gas to groceries to everything in between. The increase in wage growth for Americans was stymied by the pinch they felt in their wallets.
Rates on the Rise
Thirdly, and most importantly we saw a sharp spike in mortgage interest rates towards the end of the year. As all good things must come to an end, the 30-year went from around 3.0% to around 3.41%. This trend has continued into 2022 with the consensus being the days of historically low rates are over. Interest rates have a huge effect on the housing market in that rising interest rates decrease a person’s buying power. A 1% rise in interest rates means a 10% decrease in purchasing power. At some point, rising rates will squeeze certain buyers out of the market. Over time, fewer buyers will mean less demand, and with less demand comes a softening in prices. This is not in the forecast for 2022 as local and national demand, far outpace the supply of available homes.
The numbers for Q4 2021 show continued demand in the local Inglewood market. Where we typically see a slowdown in the fourth quarter, December’s inventory was 14% lower than that of 2020. This reflects the 1.8 month supply of inventory for the month. For Q4 in the City of Inglewood, 56 houses come onto the market, and 58 sold. Here’s what the Inglewood Market Update Q4 2021 year-over-year numbers look like.
Inglewood Market Update Q4 2021
Let’s take a look at the year-over-year numbers, starting with Number of Homes Sold. We see a drop from 65 homes in 2020 to 58 in 2021, a 10.77% decrease. Next, we look at Average Sales Price, where we saw a 6.23% increase going from $672,612 in 2020 to $810,151. Average $/SqFt was also up a whopping 15.27%, going from $512.85 to $591.22. List price to sales price was up slightly, going from 101.18% in 2022 to 101.57%, a modest increase of .39%. Oddly enough, Days on Market was up 12.5%, going from 32 days in 2020 to 36 days in 2021. This number is skewed by the few homes with 100+ days on market. Conversely, the average days on market was 18 across the county for the same period.
Click the link below to watch the Q4 2021 Inglewood Market Update Video
The Forecast for 2022
For 2022, the real estate giants such as Zillow, Redfin, and the NAR, are saying the same thing. We are in line to experience another very strong year for real estate. Prices will continue to trend upwards, although not at the same torrid pace we’ve seen over the last two years. Interest rates will also continue to rise, getting more buyers off the fence and into the market. This will put additional pressure on already low levels of inventory. As more and more people are staying in their homes longer, inventory will continue to be scarce overall. With January activity being near what the spring season normally brings, we could be in for another repeat of 2021. Strap yourself in and get ready for another wild ride in the housing market.