At the beginning of this year, I wrote my predictions for the 2022 housing market. So how did I do?
1. The Outlook for Buyers May Improve, but It Will Remain a Seller’s Market for the Foreseeable Future
For the first half of 2022, my prediction was accurate, Santa Monica has remained a “Seller’s Market”, with low-inventory/high demand. On average, houses are on the market for 26 days, which is 47% faster than 2021.
For the 2nd half of 2022 I predict we will see a much more balanced market between Buyers and Sellers. Since a Seller’s market is when demand exceeds supply and with supply building now, neither Buyers or Sellers will have much of an advantage over one another. Most experts agree that we are at the tail-end of what was a very long bull run for Sellers and many are surprised that the bull run lasted as long as it did.
2. Interest Rates Will Rise Due to Government Intervention
This one was an easy prediction as rate fluctuations are know well in advance. According to Bankrate. com, the average rate on a 30-year fixed mortgage is 6.04% while the average rate on a 15-year mortgage is 5.26%. On a 30-year jumbo mortgage, the average rate is 5.91%, and the average rate on a 5/1 ARM is 4.10%.
At an interest rate of 6.04%, a 30-year fixed mortgage would cost $6,020 per month in principal and interest (taxes and fees not included) per $1,000,000, according to the Forbes Advisor mortgage calculator. You’d pay about $1,167,650 in total interest over the life of the loan.
I predict rates will bounce around where they are now. Rates are up significantly over last year but overall still great. Like many other high-end beach cities, North Santa Monica is far less interest rate sensitive than other areas but we have always been “Wall Street sensitive”; meaning that if people see their investment portfolio doing well, they are more willing to pay higher prices for their real estate.
3. House Prices Are on the Rise
My prediction was accurate on this. In June 2022, Santa Monica home prices were up 8.6% compared to last year. The average dollar per square foot also increased to $1,715 which is a 16% increase over last year. List prices changed between May 2022 and June 2022: The cost of 3-bedroom properties went up by 15.1%, prices of 4-bedroom properties increased by 18.8%, prices of 5-bedroom properties increased by 22.1%.
As of mid-August, of the 74 listings sold in 90402 there were 41 that sold above the asking price, 25 sold below and 8 were sold right at the asking price. However, because some Sellers do not price their properties accurately to begin with, the list price to sale price ratio is not the best way to gauge the market. Comparing the price per square foot for comparable properties is more accurate in my view. As a result of increased time on market, I expect we will see a “soft landing” on prices – no longer rising in the 2nd half of 2022.
