By Gwinn Volen
For the Jacksonville real estate market, the first half of the year has been, well, weird. Agents were coming off their best year ever with record setting sales numbers wanting more of the same, and buyers were entering the market thinking that perhaps 2022 would be a bit more buyer friendly.
Instead, the first few months of 2022 has been the toughest market most agents and buyers have ever seen. Why? Supply and demand – there are more buyers than there are sellers. This scenario drives prices up and creates a competitive playing field for home purchases. Some key data points:
- There is 1 month of inventory in the greater Jacksonville area. 6 months of inventory is a balanced market.
- 41% of homes in April sold for over-asking price.
- The median sale price in Jacksonville is up 25% from April 2021.
- The highest over asking closed sale in Jacksonville was in Arlington. It sold for 74% above the list price.
- At the beach, the highest over asking closed sale was in Neptune Beach. It sold for 33% above the list price.
- Homes are selling within the first 13 days of listing, with most going within the first 5 days.
- Housing inventory is down 18% from April 2021 (but up 6% from March).
This data is a recipe for anxiety. Buyers often write several offers before they “win” a property. And agents often spend months educating buyers on the market dynamics, particularly those buyers who are afraid of being overly aggressive or overpaying.
As we move into the 2nd half of 2022, here are a few of my predictions:
#1 Home Prices Will Stay Up, But We Will See Some Price Stabilization
We have seen such a rapid price increase over the last few years it’s natural that there will be some price stabilization. The first graph below shows the climb in the median sale price in Jacksonville over the last four years. The second is for Ponte Vedra Beach, which loosely represents all beach communities as well as Nocatee. Between March and April we saw active inventory increase by 6%, and I expect that to continue due to rising mortgage rates, seasonality and media buzz on the red hot market. This will slow down home appreciation but I really don’t see prices tanking due to supply and demand.
It’s possible other parts of the country could see a dip in prices, but Florida remains a prime destination for out-of-state buyers looking for a lifestyle and tax change. So, I see us just stabilizing a bit.
#2 Expect A Small Increase in Real Estate Inventory
As mentioned above, we saw active inventory go up slightly between March and April. In addition, for the greater Jacksonville area, we saw a 10% increase in new listings for the same month period. Seasonality certainly plays a part in the increase, but there are also some sellers worried that we are at a price peak, and they are banking on home prices dipping at some point. Thus, they are cashing out now while there is a large pool of eager buyers.
#3 Mortgage Rates are Going to Remain Higher
Federal Reserve rate hikes have pushed mortgage rates up substantially over the last few months. Though 5.5% is a historically low rate, that is the highest rate we’ve seen in the last 10 years. The Fed is trying to keep inflation in check, and though they are not responsible for mortgage rate increases per se, it certainly highly influences them.
Rates might continue to rise slightly, says local Mortgage Banker Brad King of City National Bank, but the pace at which we saw increases in the first half of 2022 will slow down.
#4 Some Buyers Will Have To Shift Focus
As mortgage rates tick up, it starts to impact affordability for some. We haven’t seen this impact the luxury real estate market, but buyers in the under $1M price point are starting to rethink what they need and what they can afford. This could mean a bigger shift in this segment of the market and eventually turn off would-be buyers, but at this point, it’s too soon to tell.
#5 The Agent Pool Should Thin a Bit
Don’t let anyone kid you, real estate sales is cut throat. But it also has an incredibly low barrier to entry — take a 40 hour class, pass a test and you are let loose. Over the last two years many new agents have popped up in the hopes of a lucrative career. But this market is proving to make even the most seasoned agents weary. It’s hard to get listings. It’s hard to guide your buyers in competitive offer situations. It’s hard to keep emotions in check. And the collective real estate pie is being divided by over 11,000 agents in our area when it was once 9,000 agents. With the stress, I’d expect we’ll see the agent pool thinning as more casual agents bow out due to low sales numbers and massive competition and older agents bow out because they just too tired to deal with the mania. I feel like I’m old, but I’m not there yet.