Market Shift

Market Shift

Numerous factors can lead to market shifts. There are many examples in the real estate world of market cycles. One of the most noticeable is the switch from buyer’s to seller’s market and vice versa, especially when they happen rapidly. As much as everyone wants to predict market shift timing and duration, the are usually more complex than they appear.

Is a Market Shift Happening in 2022?

From all indications, the housing market is gradually slowing down from the fast pace it developed over the past two years. While there is no imminent crash, experts predict a more stabilized market with better prices. 

Aerial shot of houses

What Is Propelling the Market Shift?

Changes in market conditions are a constant occurrence and are mainly caused by various economic policies being put in place or taken away. Regarding the present real estate market shift, the Federal Reserve altering discount rates alongside rising inventory levels have played a significant role. 

Expiration of Federal Reserve Interventions 

The Federal Reserve has withdrawn the interventions it put in place to keep the country’s economy afloat throughout and beyond the pandemic. This has complex ties to interest rates and bond yields which in turn impact consumer confidence and mortgage rates. 

This reversal to the previous normal is responsible for the increased mortgage interest rates experienced throughout the housing market. These rates along with soaring home prices have further resulted in a decrease in mortgage applications and the quest for new homes.

With the decline in competition, house prices are also expected to drop slowly, resulting in more favorable market prices for buyers than we have seen in the past two years. However, it would still be a seller’s market, only with lower home prices, due to the fact that we still have more buyers seeking homes than there are homes on the market. All of this is sub market dependent.

Rising Inventory Levels

The years 2020 and 2021 reported the lowest inventory levels ever seen in the housing market, which played a role in the housing price surge recorded in this same period. Home buyers had few options to choose from. Hence, the limited choices were desperately sought after.

However, by April 2022, the number of houses available nationally had risen from 715,800 to 740,000 homes. Another statistic has shown that housing inventory rose by 15% in the early months of 2022. While this is nowhere near pre-pandemic numbers, the picture is looking good for buyers. 

Disparity Between Housing Price and Economic Growth 

Due to rising inflation, house prices are going up. However, given that income is not increasing similarly, it is much more difficult for individuals to afford new mortgage rates. This might have a significant effect on the housing market.

There would be lower demand, and house prices may come down slightly to cater to this disparity. Research has shown that the majority of regional housing markets are overpriced, with home prices that are markedly above what locals earn.

Magnifying glass on top of a statistic record

This is an unsustainable situation as residents have been forced to dial back on house hunting and purchasing out of frustration. The subsequent decrease in demand is one of the striking reasons for the decrease in home sales currently being experienced in the housing market.

What to Expect From the Housing Market Soon

With the various shifts already in place, there is a good chance of having more balanced conditions in the market, slowing down from an unsustainable peak last year.

Real estate investors who purchase property to gain major returns are likelier to sell these properties as market conditions shift quickly. This would further drive down the market prices of homes and compel residential property owners to hold onto their property. 

However, the market would remain a seller’s market since these would only cause slight changes in market conditions, so you might want to keep an eye on the market as well as seek professional advice from experienced realtors like AZ Flat Fee

House Sale Forecasts

House sales, both existing and new, are expected to drop, with experts predicting a 6.7% decline in the rate of home sales in 2022. This is due to the existing exorbitant prices of houses and the recent increase in interest rates. 

Experts reveal that the percentage of homes with reduced prices is steadily rising while the percentage of homes getting multiple offers is decreasing. With demand slowing down, the competition for properties would follow suit, and this will further have a cooling effect on the prices of houses going forward.

Inventory Forecasts 

The supply of houses is anticipated to keep growing throughout the year. The United States government aims to correct the decades-long effect of below demand construction of housing units that has resulted in the persistent low inventory.

Making it easy to obtain permits and funds to build more affordable homes would, in turn, provide more options and supplies to meet buyers’ demands for properties. 

Person putting a sold sign on a wooden post

Mortgage Payments Forecasts

Borrowers are more likely to pay off their mortgages. This was not the case back in 2008, when investors were less aware of the intricacies and risks involved in purchasing a property and when loop holes allowed for less secure lending. 

Over the years, more property owners have become knowledgeable of the risks associated with mortgage debts and are more likely to purchase only houses they can afford. New laws have also tightened the lending requirements which has had the intended purpose of improving the strength of loans.

In addition, a combination of other factors would also further help property owners sort out their mortgages. These factors include:

  • The current strong job market 
  • An increase in job opportunities and the declining unemployment rates
  • Increasing wages  
  • The equity built on properties as a result of the massive boom in the market

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Tips to Prepare for the Market Shift

The approaching market shift will cut across all angles affecting all stakeholders in the real estate market. Whether you are a buyer, a seller, or even an agent, it is very important to prepare sufficiently for the coming changes. Some practical tips to help you prepare include:

  • Closely monitor and be familiar with the market trends in your locale
  • Keep an open mind regarding the market and manage your expectations of the market
  • Build a solid relationship with agents and clients 
  • Improve your negotiations skills
  • Get your finances in order 

Related Questions 

Can You Predict a Market Shift Accurately?

No, you cannot predict a market shift accurately. This is because many factors are involved, and it is practically impossible to pinpoint the exact period or extent to which a market shift would happen. Most indicators are trailing which means the event has already occurred and it becomes challenging to obtain an accurate leading indicator of substance.

How Does a Recession Affect House Prices?

A recession is defined as declining GDP for two consecutive quarters. This does not necessarily mean the economy has crashed. If it is a small recession, there may be little or no changes in house prices. On the other hand, larger recessions tend to see the government trying to encourage spending, which leads to more purchasing power for buyers and higher home prices through the manipulation of levers under government control that impact interest rates and quantitative easing.

A significant recession will most often lead to a decline in the prices of homes if there is a nationwide financial crisis. Typically, there will be a low demand and high supply for houses,  pushing sellers to list their properties at lower prices to entice more buyers. 


It is evident that the housing market is trending towards a correction, and this translates to several significant changes, both for buyers and sellers. Before making any major decision, ensure to study the trends within your area and prepare adequately before buying or selling a property. 

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