Salem Residential Housing Market March 2022
If the last couple of years have proven anything, it is that life is full of uncertainties. But one factor remains the same: housing prices are on the rise. This non-stop trend has proven to cause significant stress for the home-buyer and has generated a windfall for homeowners. Despite this disparity, real estate activity has remained high and steady.
Here in Salem and on the West Coast in general, the continued escalation in housing prices, and low home listing inventory, has caused cash-buyers and well-funded buyers into bidding wars, often amounting to offers well above the market value, asking price, and appraised values. These factors in addition to the sharp increase in the cost of living, it has pushed cash-strapped city dwellers into a state of perpetual rental.
According to a recent report by Attom Data Solutions LLC that analyzed data in 1,154 counties nationwide, the “median home prices have increased more than average rents and average wages in 88% of the counties analyzed.” As a result, “renting is more affordable for average wage earners than buying a home in the most populated areas of the country.” According to the report, it was more affordable to rent than to buy in “21 of the nation’s 25 most populated counties and in 35 of 42 counties analyzed with populations of 1 million or more.” Salem is no exception. Renting is more affordable than owning in both Marion & Polk Counties.
This should not come as a surprise, given the data on home prices in the Salem area. In March of 2022, “the median home price in Marion & Polk Counties was $414,900, up 3.7% from the previous month.
We all know by now that low supply, high demand, and remarkably low-interest rates are the cause of this. We are in a sellers’ market that holds less than one month’s worth of inventory. In February 2022 our active inventory for Salem & Keizer combined was 118, down -10.6% from the previous month. Keep I mind that Salem and Keizer combined have over 73K total homes. From the perspective of a market analyst, six months of available inventory are required for a market to be considered even for buyers and sellers.
We either need more sellers or we need fewer buyers to achieve a balanced market.
Tight supply and strong demand appear to be outweighing rising mortgage rates, which would usually take some of the heat out of housing. This may soon change as our environment is evolving quickly… declining COVID cases, resumption of general economic activity have stoked inflation and the Federal Reserve has begun to increase interest rates.
While the index is a three-month running average, mortgage rates began to climb in January. The average rate on the 30-year fixed ended 2021 at around 3.25% and ended January at 3.68% according to Mortgage News Daily. It is now flirting with 5%.
Interest rates have already increased this year and more hikes are forecast, however, until Salem can alleviate the demand problem, the market will remain squarely in favor of sellers. Experts site that it may also take additional creative solutions, such as boosting housing production & affordability, upzoning single-family areas to allow several units per lot, urban-growth boundary and zoning changes, and increasing multifamily housing availability. No matter where your opinion sits, there is a long road ahead before the market shifts.
It’s a good time to sell…
Market conditions make this a seller’s market and spring, specifically May, is the best time of the year to sell your home. Historically May has proven to be the month to sell your home faster and for more in respect to annual averages. Of course, this is just a small piece of the whole picture to consider when selling, such as monthly inventory, sale prices, sale-to-list ratios, days on market, and more.
Is it a good time to buy a home?
If you’re wondering whether it’s a good time to buy a house, ask this instead: Is it a good time in my life to buy a house? Think about your life goals, relationships, and interests. How long can you see yourself living in this location?
Ideally, you’d want to remain in the home long enough for rising property values and your equity to exceed the costs of buying and selling, including real estate commissions and mortgage closing costs. That will typically take a number of years.
You could also be subject to capital gains taxes if the home appreciates in value and you sell it after less than two years.
Lastly, where do you sit financially? Take a good look at your savings, your credit, and your debt. How does owning a home fit with these considerations?
Why buy now and not later?
Economists forecast that mortgage rates will go up, after hovering at historically low levels in 2021. Historically speaking, rates are still great, and doing it now before they change more is an advantage.
Median home prices are expected to increase by 5.7% year over year in 2022, according to a survey of 20 housing and economic experts by the NAR.
Article by: Sabrina Lowe-Dikeman
Realtor – John L Scott Salem
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