New year, new housing market!
The COVID-19 pandemic cemented the fact that virtually anything can happen, as it disrupted and reshaped countless industries since March 2020. Of course, the housing industry was no exception. In fact, the pandemic’s onset is believed to have fundamentally changed the housing market (Forbes, 2020), but might some of these pandemic-era characteristics begin to shift and evolve in the coming year?
Experts are beginning to weigh in on the 2022 housing forecast, with a few key trends already taking shape (CNN, 2021). Whether you’re buying, selling or simply keeping tabs on the steadily evolving situation, here’s what the new year is expected to usher in:
It’s no secret that supply has been tight in housing markets across the country (The Motley Fool, 2021). Even before the pandemic, though, inventory was scarce. It appears that 2022 may be characterized by much of the same, as the number of active home listings fell to a record low in late 2021. In other words, buyers should expect a competitive experience, while sellers may come into some profit.
Rising interest rates
Much of the demand over the past few years was spurred by record-low interest rates (CNN, 2021). As of January 2022, however, those rates are slowly starting to climb (Investopedia, 2022). The Federal Reserve System (Fed) announced in late 2021 that they expect to raise rates three times in the coming year, and the Mortgage Bankers Association foresee the average 30-year fixed rate hitting 4% by year’s end.
While 4% is still extremely reasonable when compared to figures in past decades (think 16% in the ‘80s (Freddie Mac)), more and more buyers may eventually be priced out of the market. While this could ease some of the intense demand for homes across the country, delaying homeownership could prove frustrating and downright financially detrimental for many buyers. First-time buyers, in particular, may want to revisit their down payment amount, continue to prioritize saving or even explore more affordable areas if they’re committed to purchasing this year.
Last year was characterized by rapidly rising home prices across the nation and, while they may slow a bit, it’s unlikely that this growth will outright cease in 2022. In fact, Zillow projects an 11% increase by year’s end, which may be lower than the 19.5% projected for 2021 but is still significant. Bidding wars, particularly in the spring and summer months, can still be expected. In the same vein, outrageous offers, like $1 million above the asking price (Business Insider, 2021) or even naming a child after the seller (Business Insider, 2021), may continue but with less frequency.
The bottom line
While the COVID-19 pandemic and subsequent housing boom certainly proved that no one can predict the future, it appears that some aspects of the industry could soon stabilize. Between rising interest rates, climbing prices and continually limited inventory, some demand may be tempered in the coming year. This could then usher in a bit more balance within the housing market. The bottom line is, whether you’re kicking off 2022 as a hopeful buyer, eager seller or interested observer, this year’s housing market is sure to be intriguing!