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Home / Intelligence / Could Summer 2022 Offer a Glimmer of Sunshine for Homebuyers?

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  • July 28, 2022

Could Summer 2022 Offer a Glimmer of Sunshine for Homebuyers?

While U.S. home inventory is still very slim and interest rates have jumped, prospective homebuyers have a few reasons to stay in the game

Hopeful homebuyers have faced a number of challenges over the past decade: steadily rising prices, tight inventory conditions and competition from others who may be able to outbid them – and/or pay entirely in cash. This combination of factors has frustrated many would-be buyers, as they struggle to find desirable homes that fit their budgets and lifestyles.

And while the current real estate market still favors sellers since inventory remains slim, buyers should be aware that the summer of 2022 might open a welcome window of opportunity.

The Catch-22 of Rising Interest Rates

Rising interest rates reduce housing affordability, which can therefore cool demand. The average 30-year, fixed-rate mortgage climbed to 5.8% in mid-June, according to Freddie Mac’s Primary Mortgage Market Survey. That is up from about 3.5% just six months ago and the highest recorded weekly average mortgage rate in more than 13 years (although mortgage rates began to fall again in early July).

Even though mortgage rates remain relatively low by historical standards – they topped 18% in the early 1980s  – the recent rate spike has constricted many buyers’ budgets, forcing them to temporarily abandon the market. As CoreLogic Principal Economist Molly Boesel noted in a June market analysis, this spring’s interest rate hikes, along with rising home prices, caused the typical U.S. mortgage payment to climb by 27% since March 2021.

“In early 2022, home prices continued to surge as mortgage interest rates also increased, cutting into buyer affordability,” Boesel says.

While eroding affordability is bad news for buyers on a tight budget, particularly those in expensive markets, higher mortgage rates could translate to an opportunity for those with deeper pockets or substantial financial assets in reserve.

For people who have been patiently saving for a down payment and/or have recently increased their household income, mortgage rate fluctuations aren’t as likely to impact the bottom line of a budget. Higher mortgage costs, however, can both reduce overall homebuyer competition as well as the chance of having to pay a premium for a dream home.

Extreme Heat Could Help Dry Up the Competition

The summer of 2022 is shaping up to be a scorcher, due partially to the ongoing effects of climate change.

A June report from the National Oceanic and Atmospheric Administration deemed May 2022 the third hottest May on record in almost 130 years. Austin, Texas media outlet KXAN reported that multiple cities throughout the state reached record-high temperatures in May. In a Core Conversations podcast from summer 2021, CoreLogic Chief Scientist Dr. Howard Botts also pointed to extreme heat conditions plaguing the Northwest, including Washington, Oregon and British Columbia.

There are a lot of things people might choose to do in the summer rather than slog through home tours in 100-plus-degree temperatures. But if one can weather the summer’s most intense mercury readings, open houses should prove emptier than during the traditionally busier spring and fall seasons.

Summer Vacations Can Be a Buyer’s Friend

While ballooning interest rates and blazing temperatures might slash buyer competition this summer, typical seasonal patterns also play a role.

Real estate activity usually slows during the summer months as families turn their attention to vacations and entertaining kids who are out of school. Homebuyers typically show renewed interest in the fall, while the market is slowest around the winter holidays. Still, buyers trying to get their hands on a home before hosting holiday gatherings might have more of a leg up in the late summer than they will in September and October.

Whether or not you end up playing the housing market this summer, it can be helpful to keep certain points in mind as you navigate the buying process later this year or in 2023:

  • The Federal Reserve is likely to raise interest rates more this year to combat the stubborn inflation.
  • If you are searching for a home in an area that routinely experiences extreme heat, your property could be more susceptible to natural disasters, particularly wildfires.
  • Many families who are seeking desirable school districts need to complete closing before the school year starts, meaning that they likely bought their houses in late spring or early summer.

CoreLogic’s Intelligence blog offers timely commentary from our team of economists, meteorologists and climate-change experts. Check back frequently for the latest data-driven real estate insights to help inform your decision-making process, and happy house hunting!

© 2022 CoreLogic,Inc., All rights reserved.
  • Category: Blogs, Intelligence, Other Articles
  • Tags: Affordability, Homebuyers, Mortgage
ABOUT THE AUTHOR
Real Estate Team
Real Estate Team
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