Last year’s perfect storm of tight supply, low interest rates and high demand led to a sharp increase in home prices. Five clear trends are emerging that will help homeowners decide if they want to participate in the real estate market this year after the median U.S. home price reached an all-time high of 404,700 in the third quarter of 2021. % from the same period in 2020 by the US Department of Housing and Urban Development.
If you’re looking for some relief in the crowded and competitive housing market in 2022, there may be hope in sight. “When there’s more housing inventory on the market, more offers start to ease,” said Lawrence Yun, Realtor’s chief economist. “House prices will continue to rise, but at a slower pace.”
Whether you’re considering buying your first home or are a real estate veteran, here are five real estate trends you’ll want to watch for in 2022.
1. Bond prices will continue to rise
In the year After hitting an all-time low of 2.65% in January 2021, mortgage rates are on the rise. In the year At the end of 2021, the average 30-year fixed-rate mortgage is 3.05%, based on data from Freddie Mac.
Most economists expect rates to rise modestly in 2022. Redfin Chief Economist Daryl Fairweather predicts mortgage rates will rise to 3.6 percent by the end of 2022. While the rate hike may be scary, remember that rates are still at historic lows. . Before the Great Recession of 2008, mortgage rates never dropped below 5 percent.
What does this mean for home-buyers? Assuming rates rise from 3% to 3.6%, a $300,000 loan will cost buyers an extra $100 per month.
2. Buyer demand and competition will decrease
In the year In 2021, unprecedented increases in buyer demand will be driven in part by product shortages, home-to-work trends and supply chain constraints limiting new construction. But Fairweather sees a shift to a lower bubble market. “2022 will bring more balance to the housing market,” she said. But don’t expect a buyer’s market; Lots of choice, frustration and low price growth.
Fairweather continued, “Lower price growth discourages speculators from entering the market and leaves many first-time buyers with a chance to win a home. That could be welcome news to new buyers tired of the pace of price hikes and frustrated by multiple supply conditions.
3. Home value appreciation is slowing at a record pace
Economists generally agree that rising home prices will slow significantly by 2022. In particular, most economists do not expect inflation to decline, only a slowdown in current trends.
A NAR survey of more than 20 economic and housing experts predicted annual average home prices will increase by 5.7%, which is significantly less than last year. “Overall, survey participants believe the housing market and the broader economy will normalize next year,” said NR Chief Economist Lawrence Yun. “The reduction in inflation will be partly the result of the Federal Reserve raising interest rates.”
If the 2022 predictions come true, buyers and sellers can benefit from a more stable market, allowing for better planning and budgeting. According to the latest report from the Federal Reserve, the real estate segment of the family network has increased by $1.4 trillion, mainly due to gains in home prices. While home value appreciation is good for net worth, annual payments increase as principal, interest, taxes and insurance increase, making total housing costs a larger percentage of the household budget.
4. New house construction increases
In the year By 2021, construction supply and labor shortages have introduced an inability for homebuilders to meet new construction needs. Mike Fratantoni, chief economist at the Mortgage Bankers Association, sees the supply shortage easing in 2022, with more inventory hitting the market. “Homebuilders will have more success overcoming the current shortage of building materials and should be able to increase the pace of construction to meet the high demand,” he said.
Fratantoni says this is good news for home buyers. Price growth is expected to slow as more new construction homes are coming on the market. Due to the low supply situation and high home price appreciation, this is good news for many buyers who are currently priced out or delaying decisions.
5. Real estate investors will continue to buy
Danielle Hale, chief economist at Realtor.com, said that while home prices and rents will rise in 2021, real estate investors remain net buyers of single-family homes. In the year “Investors will continue to see strong returns from their investments in the housing market in 2022,” she said in the 2022 National Housing Forecast. “2022 will be a good opportunity for higher yields given strong demand and rising rental prices.”
Most of the pandemic period eviction protections have been lifted, and 2022 may signal a return to more normal supply and demand economics in the rental market. By all accounts, real estate investments have boomed during the pandemic, with REITs up nearly 29% over the past year.
Be ready to buy or sell in 2022
Regardless of housing market trends and forecasts, it’s a good idea to be prepared before buying or selling a home. Danielle Hale advises buyers to carefully analyze their budget before starting their home search. High mortgage rates and inflation can affect your affordability and monthly payments, so it’s best to stick to a predetermined budget.
Homeowners preparing to sell are in good shape heading into 2022. Home prices are forecast to continue their upward trend, albeit at a slower pace. As the market begins to stabilize, Hale noted that sellers should be prepared to face potential competition, but noted that affordable homes will continue to sell quickly across the U.S. market.