The housing market. What do those words bring to mind? Over the last three years in media coverage, the housing market has been followed by terms like hot, frantic, competitive, historic—and the list goes on.
Since 2020, we’ve seen unique housing market conditions. The combination of historically low interest rates and inventory—influenced in part by the COVID-19 pandemic—drove buyer demand to levels we haven’t seen in over a decade. Prices skyrocketed as buyers sought to take advantage of mortgage rates that dipped, and stayed, below 3% for months on end. Satisfied sellers turned jaw-dropping profits as home equity soared. In summary, 2020 and 2021 were marked by interest rates and inventory—both of which were lower than anyone could have predicted.
And yet, the story of 2022 has been defined by a different “I” word: inflation. As the adage notes, what goes up, must come down. And when inflation enters the proverbial picture, the “coming down” happens quickly. That’s what we’ve seen in the 2022 housing market, especially in the second half of the year.
Returning to a balanced market is good—it’s healthy for buyers and sellers alike. While certain outlets want to sensationalize the current housing trends, we’re not watching the housing market crash right now. It’s better to call this shift a correction. If the correction continues—and the Federal Reserve can control nationwide inflation rates—2023 and 2024 will be a return to a more normal housing market.
The data below shows how interest, inventory, and inflation affected closed sales YOY in 2020–2022.
2022 Closed Sales (YOY), Interest Rate, and Inflation Data