This picture of the surfer really captures how I see the market this coming year. It will be all about experience and balance.
Start of The 2nd Quarter – Housing Market 2022
Reading markets is one thing. You are going off of what has or is presently occurring. With our current housing market here in Sonoma County, here is where we sit:
Inventory is approximately running at 35% lower than what is typical for this area and this time
Homes are going into contract in 30 days or less ( $750k and under in under 2 weeks with several multiple offers)
As of March 31st, there were 371 Coming Soon and Active listings on the market ( 200 of these homes are priced at $1,000,000 up to $18,900,000)
Homes are still receiving more than their asking price 90% of the time ( If they are priced well to begin with)
Those are the basic stats for where our housing market is right now. Demand is still running higher than the supply, which ultimately drives the prices up. Answering whether more homes will come on the market is imperceivable. Nobody really knows. Many people who refinanced in the 2% range could easily be staying put for some time.
Potential sellers, however, could want to capture this sellers market if they themselves have a definite destination on the other side. That could be the conundrum however, with inventory being low everywhere as well as prices being their highest. This is where careful contemplation and choice matters.
The reason I mention that is that it is very hard to predict or determine what the markets will do. At this point, with inflation running so high, the Fed has to raise the rates in attempt to slow the growth of inflation. If left unchecked or managed, inflation can grow to a point that it will do great harm to the overall economy.
The mortgage interest rates are currently in the high 4% range. On the lending side, we are seeing higher debt to income ratios allowed to combat the rise in interest rates. As of February 2022, unemployment nationally is running lower at 3.8%. California’s unemployment rate is higher, sitting at 5.4%
You see, these are all factors as well as moving parts. They all work together as well as separately. One doesn’t necessarily always determine the other, which is why it is difficult to predict markets. It is a balancing act in attempt to keep an economy thriving or moving forward without anything falling apart.
Ultimately what ends up happening when markets surge the way have, value begins to enter into the game. At some point things can reach a distorted level that desire start to wane. The question that arises is “Is this worth it?” Just look at the “Great Resignation”. When people start choosing differently, that can alter everything.
The housing market has seen a tremendous surge in growing value in many places over 30% during these past 2 years. Much of this growth was propagated by not only the low interest rates, but movements being made out of big cities. This market surge has been “event” perpetuated. Settling down after an event is when the markets CAN potentially change again. One example of this beginning is that both Google and Apple announce “official return to office” mandates beginning in April.
Recap on Growth
Seeing these numbers for the first time, while watching Jon Stewart’s new show on Apple TV, aptly named “The Problem“, provided a dose of new insights into our stock market. Not that most of us didn’t know that a tremendous amount of money had been pouring into the stock market, but the previous 18 years pale in comparison to 2021.
As we watch the stock market adjust to the recent national and world events, it might be smart to remember when the stock market was hovering around 21,000 after losing over 2000 points amid the impending pandemic.
Now presently sitting at the low to mid 30,000 points, fluctuating these past few weeks, it really is all perspective. Panic and speculation drives markets down. But it wise to remember that there is whole group that sit on the sidelines, waiting for opportunities as this market is beginning to present, to jump in the game…especially when big shifts are happening.
Shrinkflation and New Ventures
I was just listening about shrinkflation, where suppliers of goods basically give you less for the same price. Kind of like the “Twinkie” becoming smaller over time and now companies like Procter and Gamble who own Charmin are now giving you 240 sheets instead of 264 in a roll. I am not sure how much those 24 sheets save, but if multiplied, could be quite a bit. It is pretty typical in high inflationary times, for companies to do this, as they have their own monetary battle going on.
I think one of the best things to occur during times of big change and challenges is that people and businesses get creative. Financial squeezing will do that both in our personal lives and businesses. It automatically perpetuates growth for survival, forever reaching for new ways. Not necessarily a bad thing. It is just time to think outside the box.
New Playing Fields Being Plowed
As we continue to move through 2022, it is pretty safe to say we are in for continued changes. Though we moved through a pandemic and watched the world change, we also changed with it. Priorities have shifted and the younger generations are also making big moves and contributing to these markets as well.
Regardless of how our opinions differ with how everything has played out or will play out, remember this. Understanding the psychology behind the market movements, better help gauge what could be coming. Just look at what happened to the markets when the pandemic began. The stock market gained almost 15,000 points and home values surged over 30%. Peoples desires grew and movement began.
It is said that money makes the world go around. I disagree. It is people that have and spend the money that do so. What people want and desire will always be the ultimate driver of markets.
But, ultimately happiness will usually outweigh money.