The world that we find ourselves living in today is very different from the one we knew just a week ago.

This is certainly not the topic I intended to write about this week as our housing market doesn’t seem very important compared to what the people of Ukraine are dealing with right now. My thoughts and prayers are with them and I hope that an end to the conflict can be achieved quickly.

I decided to write about this today as this past weekend I got a call from some prospective home buyers that were wanting to know if the war in Ukraine is likely to have a negative impact on the U.S. housing market. Keith and Megan have been looking for a home for a few months now and wanted my opinion on whether or not they should change their plans.

While I have no way of knowing how this is going to end, watch the following video, or continue reading below, to learn more about what I shared with Keith and Megan.

As people, whenever anything unexpected happens, whenever there is uncertainty, it’s natural to become fearful.

When we become fearful we have a tendency to either freeze or spring into action. Some people run while others hide.

While there is no way of knowing what the long-term impact will be, or could be, mortgage rates and home prices are the two areas most likely to be impacted in the short term.

Mortgage Rates

The majority of the world has responded to the Russian invasion by leveling the harshest, most severe economic sanctions ever seen. There was a near-immediate impact on the Russian economy and world financial markets also reacted by trading lower while the price of oil jumped.

Mortgage rates, which had risen quite sharply over the past 4 to 6 weeks, declined slightly last week and as of this morning have fallen a little more. Although most of the experts still feel that mortgage rates will continue to rise in 2022, it is highly likely that we will see a pause in rate rises as this conflict continues.

While that will help some buyers who were concerned about being priced out of the market, lower mortgage rates will likely cause an increase in demand which will put additional upward pressure on home prices.

Home Prices

The pace of home price appreciation, which had leveled off in the fall of 2021, increased in December as mortgage rates started to rise. Homebuyers who had been on the fence about buying jumped into the market in an effort to avoid being priced out by further mortgage rate increases.

It is very possible we will see the same thing happen again now that mortgage rates have declined, especially if further rate increases are delayed by the conflict.

Pending Home Sales

There have been a few reports over the past couple of weeks, and there will be more, noting that pending sales (homes that are under contract) are down. Please don’t assume, or take this as a sign, that the real estate market is slowing or in trouble.

This is simply a case of there not being enough homes for sale. Like with many goods across a variety of industries, there is simply not enough supply to satisfy demand. (For additional information take a look at my blog post from last week.)

In February 2022 there were only 128 homes for sale in Frisco, down from 174 in February 2021.

Not too much of a decline you say?

Consider the fact that in February 2020 (before Covid) there were 706 homes for sale and 964 in February 2019.

Again, pending home sales are down because there simply aren’t as many homes for sale as we normally see this time of year.

The good news is more new home construction permits were issued last year than any year since 2006. Supply issues are causing new home construction timelines to be longer than normal, but additional inventory is on the way.

In the meantime, record low supply, coupled with high demand, means prices will continue to go up unless we see an escalation of the conflict in Ukraine.

Here are the latest expert predictions for national home price appreciation this year;

Although not as steep as we saw overall in 2021, all the leading experts believe prices will continue to climb this year.

Is Now a Good Time to Buy

The age-old question.

The concern, or fear, buyers have is they are buying at the top of the market and their home will lose value in the near term. It’s a common thought, but hindsight is 2020.

Knowing what you know now, do you wish you would have bought a home a year ago? How about 5 years ago?

The average homeowner currently stays in their home between 9 and 11 years. Over time, real estate has proven to be one of the safest, and best appreciating, long-term assets.

Here’s a look, by state, at home price appreciation over the past year;

By comparison, here’s a look, by state, at cumulative price appreciation over the past 5 years;

Going really long-term, here’s the cumulative price appreciation, by state, since 1991;

Bottom Line

Only you can make the decision that’s best for you. Currently, there is no indication that the war in Ukraine will have any negative impacts on our housing market this year. If anything changes, I will be sure to let you know.

Have additional questions? Please schedule a one-on-one call with me and I’d be happy to discuss your situation in more detail.