Surprisingly, the pandemic has fueled the US housing market. In fact, many real estate market trends converged in 2021. A decade-long housing shortage came together with historically low mortgage rates. Meanwhile, the world shifted toward remote work, and young buyers found new opportunities to buy their first home.
Here’s what we expect to happen in 2022.
What Changes Lie Ahead in 2022?
The nation’s red-hot housing market cooled down towards the end of 2021. Now, you may wonder what’s going to happen next. Fortunately, you’ve come to the right place to find out.
Real estate experts expect a whirlwind of activity in 2022. For example, they predict that home sales will continue growing by another 6.6% this year. Furthermore, they believe that home prices will rise 2.9% above the highs of 2021. As the year progresses, analysts also forecast a gradual uptick in mortgage rates.
These circumstances will make affordability a top concern for 2022 homebuyers. The year could prove quite rocky for the 45 million millennials entering the prime first-time homebuying age.
Money Matters in the Evolving Economy
Rising prices and mortgage rates will continue to challenge homebuyers throughout the year. Nevertheless, rising rents will motivate many hopeful first-time homebuyers.
Analysts forecast that rents will increase 7.1% throughout the year. In addition, a competitive job market will give potential first-time homebuyers a financial boost, making them more likely to invest in a new home.
At the same time, however, the work from home trend will likely continue. As a result, this year’s homebuyers can broaden their search parameters. They can look for homes in desirable suburbs and move away from expensive metro neighborhoods.
Today’s Buyers Will Face a Different Market
Rental affordability will remain a vital issue among the nation’s renters, compelling more people to consider buying. Meanwhile, the pandemic remains persistent, and housing stock remains low. Also, supply chain delays affect every part of the real estate industry.
The pandemic has brought affordability into focus. It’s been a critical concern in the housing industry for years. Nevertheless, affordability will remain a primary focus in 2022.
As millennials come of age in the real estate market, one thing stands out—they’re at a disadvantage. Real estate is much more expensive than when previous generations invested in homes. Also, Baby Boomers are staying in their homes as their lifespans increase, resulting in a tighter housing market.
As a result, a growing number of first-time homebuyers will most likely need financial help for their down payments. This circumstance will limit who can buy a new home. Furthermore, COVID-19 has worsened this issue.
Will the Government Intervene?
As for would-be homebuyers who currently rent, there’s increased legislation aimed at the rental market. These years during the pandemic have proved turbulent. Legislative support for rent control is gaining steam. Lawmakers will likely push rent control as a fast solution for providing affordable housing.
Watching how these policies unfold is essential if you plan to buy a home. They could have the opposite of the intended effect. In other words, rent control laws could drive up housing costs by diminishing available housing and increasing market competition.
The 2022 Real Estate Market by the Numbers
Analysts expect 30-year fixed mortgage rates to rise slowly from 3% to 3.6% towards the end of 2022. They cite the waning of the pandemic and lingering inflation for this circumstance.
Real estate experts expect high housing prices combined with high mortgage rates to slow annual real estate price growth to 3% in the late fall. If this happens, this slow growth rate could discourage speculators from buying up available homes on the market. As a result, first-time homebuyers would have less competition.
Also, if the pandemic subsides, experts believe that consumers will once again start to focus on climate change. As they do, potential homebuyers will look for climate change-resistant features.
Housing Stock Could Continue to Dwindle
The housing stock in the United States was low even before the pandemic. With the pandemic came supply chain problems and labor shortages, making things worse.
Now, home builders are trying to ramp up production. Nevertheless, housing inventory will remain scarce due to these obstacles. Also, the demand for housing among millennial homebuyers will keep the market fast paced and competitive.
The number of actively listed homes for sale fell to a record low toward the end of November 2021. As spring and summer approach, more listings will likely enter the market. Still, it’s unlikely that these new listings will supply enough housing inventory to meet demand.
Interest Rates Could Rise
Analysts also expect the Federal Reserve to raise interest rates several times in 2022. Mortgage rates will likely rise in tandem.
In November, real estate experts also predicted a 30-year fixed mortgage rate of 3.6% by the end of 2022. Already, however, we’ve hit that mark.
A rising interest rate isn’t necessarily bad news for homebuyers. It might help to keep speculative buyers off the real estate market. This circumstance is another factor that could result in less competition for residential homebuyers.
Home Prices Could Also Rise
Unfortunately, things will most likely not go your way if you were hoping for a limited crop of homebuying competition in 2022. A tight housing supply, elevated demand, and a relatively low mortgage rate all point to one sign—it’s still a seller’s market.
Bidding wars on active listings will most likely become commonplace in 2022. They’ll become especially prevalent during the spring and summer.
In this instance, home prices will likely rise. Real estate experts forecast an 11% increase in home values in 2022. This amount isn’t as much as the increase in 2021. Nevertheless, it’s still substantial.
If you plan to buy a home in 2022, staying prepared is essential. Research ahead of time and ensure that you’re ready to find the ideal listing.
Fortunately, we know the perfect place for you to start your search for a new home. Marketplace Homes is here to meet all your real estate needs.
Please feel free to browse our available homes across the nation.
Andy is an experienced real estate professional who has spent over 7 years at Marketplace Homes leading teams. As a savvy sales expert, he hosts our brand new construction web series Breaking Ground. For the past two years, he has taken the helm as the company’s CRO, ensuring the alignment between Marketing, Sales, and Customer Success. Providing creative insights and solutions, he uses data and continues to develop teams to make the complex simple. His passion is to help every client find the best solution to move, invest, and much more.