March 17, 2022
Presented by Dr. Lawrence Yun, Chief Economist, National Association of REALTORS®
1. Gas prices will remain elevated for quite some time due in large part to low drilling from COVID pandemic and the Russia-Ukraine conflict.
2. Employment in Michigan is still down 2.6 percent from pre-COVID days. We are in a unique situation where there are more jobs available than people who are willing to work. Large amount of people retiring early during COVID has also led to labor shortage.
3. After 2008 recession, Lansing job creation was booming and then COVID pandemic hit.
4. However, NAR membership is at an all time high. There is no labor shortage of REALTORS®.
5. Inflation is at its highest in 40 years. (7.9 percent)
6. The Federal Reserve raised interest rates in March and plan to raise interest rates multiple times in 2022 in order to contain inflation. (The first hike since 2018.)
7. Real estate professionals should be mindful that home prices are a good hedge against inflation.
8. Home sales were exceptional during COVID, due in part to:
-Historically low interest rates
-COVID led people to desire more space, away from people.
9. Housing affordability is going to worsen. Because of mortgage rates and housing costs are projected to rise more than wages. (Housing affordability is defined as payment to income percentage.)
10. Inventory is expected to rise in 2022. Note: It will not return to a balanced market, but will improve.
Why?:
-Builders are economically motivated to build more, despite supply chain struggles. As builders build more, the market will open up as “trade-up” buyers get into new homes, freeing up their homes for the market.
-The COVID pandemic has resulted in almost 1 million deaths in the United States. Therefore there may be more homes via estate sales and downsizing home owners.