Ep 117 – 2022 Mid-Year Housing Shift And Forecast For First Time Home Buyers 

 August 4, 2022

HBH 117 | Housing Market

Everything has been interesting so far in housing this year. Is the housing market still going up, or has it reached its peak? Are we going to slow down or crash anytime soon? Most importantly, how will these market shifts affect first time home buyers? In this episode of How to Buy a Home, host David Sidoni does an analysis of the mid-year housing shift of 2022. Get all the predictions and forecasts for 2022 and beyond. You do not want to miss this episode!

2022 Mid-Year Housing Shift And Forecast For First Time Home Buyers

Current Housing Market Updates And Predictions

What is next in real estate 2022? Are you saying there is a chance? First-time buyers are back in business. The crazy price hikes in the last few years are slowing down. What is next? Here is everything that you need to know about what happened in housing in 2022 and where we are headed next and how to plan your next best move. Let’s do it.

What is up How to Buy a Homie? Welcome to any brand new readers and as always, hello to my OG homies. What is up? Maybe you are here because you are just curious about what is going to go on with the housing market in the future. You have come to the right place. Not that I have a crystal ball and not that I am selling you anything. I am simply just a balding old dude, spitting mad truth into the mic. I want to make sure that all first-time home buyers get the education that they need so they can become empowered with real information, not just freaky headlines. We have lots to get to. We are going to take a deep dive into the 2022 housing market.
The first and most important thing, whether you believe this or not, I am going to say it because this is what it all boils down to, waiting is going to cost you. I will give you all the facts and data behind it. As a matter of fact, I already did. I have done a whole bunch of episodes about this. I have laid out all the facts, all the data, and all the math in several different episodes, starting back in 2019. If you want to go back and check out just the ones from 2022, you are going to hear all the forecasting, not just from me, but from people way smarter than me.
You will get all the updates on what was going to go on in 2022, what did happen, and then where we predict it is going to go in the future. I am not going to do a giant rehash of all of that here, but I am going to give you some simple insights that pertain to the forecasts for the rest of 2022. Here is what I am going to go over so you can have a little bit more of a clue regarding where this crazy housing market is going.

It’s A Slowdown, Not A Crash

Here is what we are going to talk about. Number one, do not expect a crash. Do not wait to buy a home unless you have to. End of story. I am going to let the facts and the research from the people who are way smarter than me, explain why this is true, but even Captain Conservative Dave Ramsey says we have at least five more years of the market going up. It is going to be going up slowly. Dave says, “Right now is the cheapest time to buy in the next five years.”
[bctt tweet=”Don’t expect a crash. Don’t wait to buy a home unless you have to, period.” via=”no”]
The second thing we will talk about is inventory. It is still crazy low. How many of you homies out there are sick of me talking about inventory? You are going to keep hearing about it because that is what is important. Supply and demand are everything and anything economical. The prices are going to keep going up. It is just going to be a lot slower than it did so far.
The third thing to talk about is interest rates. This is a big one. They jumped the most they have in decades and super fast. It happened in a couple of months. The market that everyone said was going to stop just kept chugging along. No crash, no bubble burst, no pop. Things kept moving, but a lot slower. Do not believe in all those Debbie Downers who were telling you that it is going to pop things and crash things because it did not.
There was a full 2% hike in rates and it did not stop the market. If that is not going to crash the market, not much is going to. The supply is just too low for the number of people that we have alive and stuff. People are still going to be buying houses, but instead of 40 people offering on a house, now it is down to 20. It is still pretty insane.
The fourth thing we will hit on is the recession. It is common. That is a fact. It is not going to kill housing. There is the math behind that, supply and demand, historical data, and all this stuff I have been saying. The fifth thing is inflation. That is a hot topic and for a good reason. Most people think that inflation kills all markets. Inflation sucks and your dollar is worth less and everything is getting more expensive. A lot of people think that the last thing that you want to do during a time of inflation is to make a big purchase. I am going to go into all the data behind the facts of that.

HBH 117 | Housing Market
Housing Market: Supply and demand are everything and anything economical, and the prices will keep going up. It will be a lot slower than it did so far.

Purchasing a home can actually be a huge hedge against inflation by eliminating your rising rents and fixing your monthly payment into a forced savings account that is your home with a payment that you already make every month anyway, thus shielding you and keeping you stronger in a weaker economy. Let’s get at it. These are the facts. It is up to you how you want to interpret these facts and math, and how it is going to affect the housing market.
The first one, it’s not a crash and not a bubble burst. This is a slowdown. Do yourself a favor and make sure you read past the headlines. Do not get caught in that clickbait stuff. You are better than that. There is a great economist I was listening to. I got a lot of information from him on this. His name is Brian Buffini. He has been doing this for years. The way he describes it is this is a pressure release, not a pop. The market was too hot and the pressure built up. It was just released a little bit. 2021 and the first part of 2022 was straight up out of control. It’s too hot. It was a post-pandemic, low inventory and psycho-buying bonanza.
We have the combination of low inventory, people coming out of the pandemic, and the lowest interest rates ever. That meant it was cheaper to buy than it was even conceivable. It was more foreseeable than people buying when rates got that low. This built up too much and the pressure release is happening. What all the pressure release is doing is slowing down the white hot market. That pressure release is necessary because if it does not happen, then we blow. Trying to buy a home when you are a qualified buyer with 40 other offers on it is not sustainable. We cannot keep doing that forever.
Eventually, if we kept going like that, we would discourage every buyer. Keep in mind that the sale of anything does not happen without a buyer. This had to adjust eventually. If that is the case, if we are releasing, why are all the major economists predicting a slowdown and not a crash? The finance people out there who straight up usually root for a crash because that is when they cash in, why are they forecasting that they do not see this crash? In fact, what they see is just a slow down for a while with the prices still going up, just at a slower pace.
[bctt tweet=”People are still out there trying to buy houses. It’s just less than it was.” via=”no”]
That brings us to our second topic, which is the inventory. The inventory was super low before the pandemic. A lot of people do not know that. Did you know that from January to March of 2020, pre-pandemic, there were crazy bidding wars on homes? It was a serious run-up on housing right there. It was right going into that busy spring season. We were starting to see how nuts it was. Inventory has been down since the 2008 crash when all the builders went bankrupt. The builders stopped building and there are not enough houses.
The numbers actually show you that during the Great Recession from 2008 to 2012 or the dark days, we ended up over those terrible years being short on homes built by about 2.5 million homes. Considering the fact that during our regular good years, we usually only build about 1.2 million or 1.3 million homes per year. Making up 2.5 million is not easy to do. In fact, in 2022, we are still woefully behind on the number of homes being built each year to catch up and make up for that 2.5 million. Some people say we are not going to catch up until the year 2030.
We get to our third one, interest rates. This is a big one that is scaring a lot of people. What I am seeing and what the forecasters and the economists are seeing is it is causing a lot of panic that is unnecessary. When rates rose from around 3% to almost as high as 6%, monthly payments went nuts. They rose close to 50%. I understand that with inflation, your gas and your groceries cost more, but a raise in your monthly housing payment of 50% is a lot more dollars. That is a serious increase.
That is a lot more money than the increase you have in filling up your fridge or your tank. A $400,000 home at 3% back in 2019 and 2020 and at the beginning of 2021, you could get a mortgage for 3%. That was going to cost you $1,686. You go to 2022’s average rate at 5.7%, that same home is $2,786. That is $1,100 more. That is a 65% increase in the cost of owning a home. The people who could barely afford to qualify for that 3% rate were out shopping, trying to buy a house. They either had to drastically reduce the price of the home that they bought or get out of the home shopping game. What that left are the people who had a little buffer room in there.

HBH 117 | Housing Market
Housing Market: They either had to drastically reduce the price of the home they bought or get out of the home shopping game.

At the same time, while all this is happening, their rents are going up like crazy. It is freaking people out. We have got this radical increase in interest rates, which are making home-buying not affordable for people. At the same time, we got this radical increase in rents, which is making existing seem impossible. The interest rates doubling in a little more than two months is nuts. Let me explain to you what is happening since the rates took off a lot faster than anyone expected.
How is that affecting the housing market? It is not affecting it that much. I can hear your gears turning in your head, “What? Everything got more expensive. That should mean that nobody can buy anymore and the market is going to tank.” Think again. This does not mean that the competition for housing is over. It is still happening. People are still out there trying to buy houses. It is just less than it was. As I mentioned before, this is a slowdown. It is not a crash.
A slowdown in market activities does not mean that prices go down. You still could be in bidding wars. It is just that you are only going to be with 10 people instead of 20. I have said it before, 20 people bid on a home in March means there was one winner and 19 people still shopping for a home. Let us say in April and May, those 19 people out there who were shopping saw the interest rates freak out and go high. Let us say maybe nine of those people cannot afford it because the interest rates went up. You have still got ten people that still can afford it and are still going to be competing to buy the next home.
If you have not been studying this stuff long, let me give you a little long-term reality on the mortgage interest rates. Back when we had rates at about 3.75, that was a real interest rate at the time. We ended up hitting that crazy artificial rate of 2.9%. That was crazy super low because of the way the government was doing things with money and a whole bunch of other factors. You cannot compare that rate to anything else because that was a random, once-in-a-century, post-pandemic, government-manipulated rate. 2022’s rate at 5.7% means we are not that far off of the real rate, which is about 3.7%.
[bctt tweet=”A fixed monthly housing payment is your best bet against economic uncertainty.” via=”no”]
I know what you are thinking. You feel like it is Monday or Tuesday after Black Friday and you missed the sale. Let me make you feel better about that. In February 2020, the average for a 30-year fixed was 3.5% to 3.75%. In June of 2021, we hit that crazy drop. We were down to 2.9%. In June of 2022, we bumped up to 5.7%. It feels like you went up way higher than it ever was. That is not true. That way low rate was a blip in history. You cannot use the recency bias to shape your opinion. You have only been looking at this recently and you do not know the average numbers.
People still bought homes at 6% all the time. Back then, when they were doing it, there were four times as many homes for sale. Last time, it was at 6%, four times as many homes and people were still buying. “Mortgage rates have doubled and I cannot get in, what do I do?” I understand where you are coming from. Look at the big picture and you can see that 6% or 5.75% is not that far off the normal interest rate for the last number of years. You have the option with a short-term fixed to get into the fore if that is what you need to do. You can then wait it out and look to refi when the inflation settles down.
I have told you all before that if you are going to do an adjustable loan, make sure you know what you are doing. I am saying that maybe this is a time that if you want to take advantage of what is going on with the forecast that we see, you start figuring out and knowing what you are doing with an ARM, an Adjustable Rate Mortgage. There are opportunities are out there to get into a 5, 7 or 10-year fixed. That is a long time to be fixed at 4% or 4.15%. That is, if you want to seek lower payments, you can get in now.
That means that you are betting that over the next 5, 7 or 10 years, they are going to get a handle on this inflation, which historically, they need to do. It is a pretty good bet that they are going to do that because if this inflation goes on for more than five years, that means every politician in the office is going to get voted out. The new ones who come in are going to do stuff to kill this inflation. Do you not believe me? Let me give you two names. Jimmy Carter and Ronald Reagan. Do you not understand that? Google it.

HBH 117 | Housing Market
Housing Market: The market always moves in cycles but doesn’t move on a whim. It moves on data.

It is an adjustable rate loan, but it is fixed for 5, 7 or 10 years. This is a serious option for a lot of people out there who are considering getting into the market because they do not see a crash coming and they want to ride that slow price appreciation without paying their rent. If you know it is not going to be a crash and you think it is going to be a slow rise, it is something to think about. I know you are totally bummed out. You missed the Black Friday bargain basement at 2.9%. Not to worry. You could still buy at the regular rate.
In the worst scenario, if rates plunge and you are mad that you bought at that high rate, you do what the rest of the world does at that time. You refinance. That means you adjust down to the new low rate when the market hits there. It happens. People do it all the time. The market is not going to crash because rates are at 5% or even 6%. It has not happened. We still got tons of buyers and not enough homes. Over the past few years, we have had a plethora, an exorbitant amount, gluttony of buyers all chomping at the bit. We are seeing a shrinkage of those buyers, but losing some of them does not mean that we lost most of them.
The equation still works out because the inventory is low. There are still plenty of buyers left. The inventory has only slightly increased. Those that are left that are still in the market and still playing the game means they had a buffer and they can handle the potential increase in the payment or they have begged, borrowed or stolen from someone to help them adjust to the new monthly increase. The bottom line is the number of buyers still outnumbers the number of homes for sale. The market is going to remain afloat. In fact, it’s still rising slowly, but that will mean we will not see those prices spiking as we did over the last number of months.
Before I get into the recession and inflation and how that affects you, let me throw you a bonus fact. Rent sucks. Landlords suck, and they are raising rents at levels I have never seen in my life as a renter and as an advocate for renters since I stopped renting. That period goes all the way back to 1991 when Full House, Rugrats, Doug, and the Fresh Prince were ruling TV. I am old.
[bctt tweet=”Buying a home might save you from the recession.” via=”no”]

Rising Rents And The Best Hedge Against Inflation

We have this chart of what rents have been doing since 1988. If you can’t see this chart, take your hand and put it maybe close to a 60-degree or 70-degree angle, that’s what rent had been doing. I had a show where I interviewed a listener who moved into a complex that, right before he moved in, the rents had just been jacked up 60%. In his first year there, he figured out he wanted to plan to buy a home. He got ready and thanked God he did because he had only been there nine months and he was ready to move out. At the end of his lease at twelve months, they were going to jack it up to 30%. That is a total of 90% increase in just twelve months.
That is not the way it is everywhere, but I can tell you, everywhere, rents are going up 20% or 25% on average. 90% is insane. I do not know what was going on there, but 20%, 25%, 30%, and 35% are sure as heck a lot more than inflation going up 90%. Your dollar is worth less, but your landlord is going to be asking for more of those dollars at the end of your lease. A fixed monthly housing payment is your best bet against economic uncertainty. I know this is weird to hear, considering that the final two things we have got to talk about are a coming recession and this crazy inflation.
It is the perfect time for you to buy your home. It is not perfect. The perfect time would have been 2012 and get all that equity. When I say perfect, I mean that when we are facing economic uncertainty, it is great to have a home because it is your protection. It is literally your shelter and figuratively your fiscal shelter as well. To all the people who said that they were going to wait it out and buy homes again when it was affordable, all the people who said, “This is crazy. It is not sustainable. I am going to wait until the high rates come around and that will make it crash. That will stop things.” I never wanted to be wrong more, but I was not.
Facts not fear. I deal with data in history, not recency bias and headlines. What happened is 5%, even close to 6% is here and the crash did not come. All it did was weed out the bottom portion of the multiple buyers on every home. We still have multiple buyers on every home, just not as many. Homes are still selling. They are just a little slower pace compared to the insane speed and the insane prices that we had.

HBH 117 | Housing Market
Housing Market: It’s not going to be sexy if you buy a house right now, but you’re going to thank me in 10 years. You’re going to be able to dump your rent and make a better life for yourself without having to save money.

I do my best to help open the mind of first-time buyers and eliminate the recency bias of today’s headlines. The market always moves in cycles, but it does not move on a whim. It moves on data. I hear so many comments from people that are trying to time the perfect time to buy a house. There really is no perfect time.
As I said, the perfect time was 2020, 2021 or 2012, to be precise. When you hear people flippantly say, “You cannot buy now. It is crazy. Rates and prices are high. You got to wait.” Why are they saying that? What data do they have to back that up? Maybe they have been closely paying attention to things in the housing market, but I have been watching this since 2005.
Those people were saying that back in 2019 and 2020, and they said it was going to crash now with 5% and 6% rates. It did not. Not to brag, but I told you when it was perfect when I started the show. I ended up looking like a hero to all those people from the very beginning who bought in 2019 when I started the show and in 2020, even the folks who bought in 2021. What I am telling you now is forecasting for the future, trying to figure out what is next in 2022. Is that a slowdown? It means it is not going to be a great big splashy, sexy buy. You are not going to make a ton of equity the first year you own your home. The alternative is to spend $25,000 or $35,000 a year in rent while you are waiting to get some imaginary discount that is not going to be coming for years.
You can think of it this way. Let me give an example. Let us say the market goes up for a couple of years, ‘23 and ‘24. It flattens in ‘25 and starts to go down in ‘26. If you are going, “What happens if it crashes?” It is not going to crash. It is not happening. If that is what you think, wrong show. Whoever you are, do the math. I am not selling $100,000 gains here. I am actually giving you the truth. I am still saying in this example that the market goes up for only two years, even though some people say it is going to go more than that, but let us finish the example.
[bctt tweet=”Anyone trying to tell you to buy a house right now is selling you something.” via=”no”]
It goes up in ‘23, ‘24, corrects and goes down in ‘25, ‘26. That means you are renting for four years. You are paying all that money. When you get ready to buy four years from now up to two years down for two years, prices are still the same as they are now. Who knows what interest rates are going to be? You spent all that money wasted because you are waiting for that big discount to come. It is not going to come.
Do yourself a favor. Keep doing the research, read the facts, and understand what is behind what is happening because you are going to see headlines saying that the number of sales is down 13%. That is true. If you read the entire article, not just the scary headline that was there to make you click on it, sales are down 13%, but prices are up 7% to 8%. Over the past few years, security is everywhere for people. We are more ready for this recession than we have ever been. We have $3.8 trillion in equity.
The average person over the last twelve months has gained $64,000 in equity. That is free value on their home. That foreclosure crash that people talk about is not coming. People are secure in their homes so they can withstand things. Not like the last time. Do not give up on the dream of buying your home. In most markets, the monthly payment is pretty much the same as owning or renting. You might have to pay a little bit more, but you are paying for your security, using all the right tactics with less competition. Now is a better time than ever for you to get a home because it is going to be a lot less battle and a lot less competition.
What do you do? You make sure you have the right unicorn team representing you because the run-up in housing in the last couple of years has given a lot of people the idea that maybe this is what they should do. They should help people buy houses. Here is a fun fact. We had an increase of realtors of 100,000. A whole bunch of people think of this as a great way to get rich quickly. It will be easy. That dropped the average experience of a realtor from 9 years to 8 years. It does not sound like a lot, but if you think about it, if everybody dropped a year in how much experience they have, that means you have to be more careful than ever when you are picking someone.

HBH 117 | Housing Market
Housing Market: Nobody wants to take the time to teach you how to buy your first home. If you take your time, you stay renting and the landlords make more money.

We got three million licensed agents in the United States. Do you know many homes we have for sale? 1.25 million. That is too many people trying to do the same job. What does that mean? It means the average real estate agent sells 3 to 4 homes a year for a grand total of a salary of $33,000 a year. You can work at In-N-Out burger for $18 an hour. If you work 50 weeks and take two weeks of vacation at In-N-Out and you work 40 hours a week, you can make $36,000 a year. The average realtor makes $33,000 a year. Do you see why I started this show?
If you are new to the show, go to HowToBuyAHome.com to get started. You can learn everything you need to know for the big question, “Where do I start? What do I do?” When you are ready, to help you avoid those In-N-Out burger salary real estate agents, we will make sure that you know everything you need to know about choosing the right realtor. Someone who makes less than my local burger flipper. Keep checking the show. We are going to keep kicking these out with all the new economic updates with what is happening as the market changes.
If you are looking to get things started, go to HowToBuyAHome.com. If you have not been to the YouTube channel, check it out, How to Buy a Home. Subscribe there for YouTube videos. We are also on the YouTube shorts. I’m still on Instagram @DavidSidoni. Also, the Facebook group is How to Buy a Home. I am still waiting to hear back from you guys on where we start our community. I got some people starting to come back to me and give me some ideas. Someone said I should start a subreddit. That is awesome.
How do you start a subreddit? Somebody tell me how to do that and I will do it. I am also wondering if maybe a Discord is something that we should do. Let me know about that. Reach out to me, HowToBuyAHome.com. Just send me an email. I know I did not talk about points 4 and 5, the recession that is coming and the inflation. They are too big of topics. I am going to save that and we are going to do it in part two of this episode. Thanks for joining. Review the show. Share it with your friends.
Let’s start the revolution of empowerment and knowledge. It is not going to be sexy if you buy a house right now, but you are going to thank me in ten years. You are going to be able to dump your rent and make a better life for yourself without having to save money. Everyone is like, “I do not want to save my money. I want to live and do things now.
Who wants to save 30% of your paycheck because a recession is coming? I do not care. FOMO. YOLO.” I get it. I am even on your side. You do not have to save 30% of your paycheck every month to be ready for what is going on. You just have to replace your biggest monthly payment. Change it from rent to a mortgage, then you are prepared. It is that simple. You can do this.

Important Links

This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!
Instagram @DavidSidoni
Tik Tok @howtobuyahome

You Might Also Be Interested In:

Ep. 208: STEP Eight – Do Your (Online) Research
Ep. 205: STEP FOUR & FIVE – Managing Debt & Creating Savings
Door Opener Vs. Unicorn: Choosing The Right First Time Home Buyer Real Estate Agent
Ep. 204: Step Three: Credit Score