2021 was an eventful year in the real estate market. With so much going on and rising costs, many may wonder how it will affect real estate in 2022. So far in the third quarter of the year, the housing industry has a lot going on for itself. There has been a minor drop in mortgage rates and signs of dropping home sales. But, many analysts believe that the near-term future will be predictable. Will property values continue to skyrocket? In our current economic scenario, how will the real estate market fare? Here are the 2022 real estate occurrences to watch for those waiting to buy or sell.
Slow Housing Market
Experts expect that home price growth will decline to single-digit appreciation. In a year, that rate of increase in home prices is almost half of what we have seen thus far. As a result, there will be fewer bidders in homes. Houses will also not sell for more than the asking price at the current pace. Although, as we can see, there are recessionary anxieties that affect buying activities. Higher mortgage rates, rising property prices, and housing-market activity has already slowed. Slower demand will persist into the third quarter, denoted by a decline in home sales. There will also be a year-over-year decrease in home price growth. More price cuts are inevitable, partly owing to seasonality. Sellers will also deal with the reality of reduced customer demand. According to the most current data from NAR, existing-home sales have fallen for five months in a row. But the market usually recovers around the back-to-school season. The summer months tend to be slower due to vacations and children being out of school. Still, the housing-market activity tends to speed up in the fall. It remains a question whether Q4 will follow usual seasonal patterns.
Home Prices Continuing to Surge
The present real estate trends have a connection amongst themselves. Prices for single-family homes climbed in 2020 due to growing demand and supply. Because of the continuous dwindling supply, it is likely to stay high in 2022 and beyond. Shortly after the pandemic began, the housing market reversed course for a bit. It happened as prices fell and people who wanted to sell their homes reconsidered. But, prices began to rise again after a few months. The increasing price tags for houses are also slowing, but not as much as buyers would prefer. Prices continue to be a record high. For many buyers, affordability is the primary worry in the housing market right now. Both property prices and mortgage rates have climbed. This puts many potential first-time buyers out of the market. While buyer demand remains high, home prices will continue to rise. But the growth of prices will moderate.
Low Mortgage Rates
If a recession is on the way — or has already arrived — mortgage interest rates may decrease. Rather than continue their rising trajectory this year, rates will fall further. According to Bankrate, that route was turbulent in July, with the 30-year fixed rate averaging 5.67%. Given the recessionary fears, the standard 30-year fixed rate will average 5.35% in August. According to Bankrate's projection, the rate will be 4.5% for a 15-year mortgage. Mortgage rates have not moved much in response to the Federal Reserve's recent rate hike. August will be an intriguing month for interest rates. The Fed's decision to hike rates in July appears to have no effect on rising mortgage rates thus far. Many believe the rate increase was only a reaction to the higher inflation figure in the June report. Currently, there is a global economic concern and a likelihood of a recession. As a result, rates have since returned to the 5.5% average, as demand for bonds remains robust. Rates have continued to fall as fears of a recession outweigh anxieties of inflation.
Low Housing Inventory
The most challenging real estate trend to accept is that inventory is very low. This outcome is partly because so many people are looking to buy right now. It is also because fewer sellers are offering their homes for sale. But you look at it, there were fewer properties for sale last year, making it more difficult to meet buyer demand. A continuing inventory shortage is one of the primary reasons for the low risk of a 2022 housing crash. Many experts believe there are not enough homes available for sale in the housing market. While there has been a slight increase in the last few months, housing inventory remains very low. The housing inventory is low, especially when compared to historical trends. According to analysts, the market is four million homes short of meeting needs and demand. Experts cite supply chain and labor shortage difficulties as crucial real estate issues. These issues make a big rise in inventories less likely. As a result, the little availability drives up property prices and demand. The increase in mortgage rates also put a damper on things. Because of the low inventory, there will an increased competition for available properties. Thus, as a buyer, many must prepare to act fast once they find a home that fulfills their criteria. There is a good chance that someone else is also interested in the home interested buyers want.
Final Thoughts
For all these factors, housing inventory is likely to increase in 2022. It remains a question whether this occurs at a rapid enough rate to level off the housing market. But, it is reasonable for first-time buyers and investors to expect better outcomes. There should be a slight rise in housing inventory over the year. Buying a home is a personal decision in any market. A home is the most expensive investment most individuals will make in their lifetime. So, it is critical to be capable and prepared before jumping in. Trying to time the market or predict what will happen next year is not the best way to buy a home. Instead, buy based on budget and requirements. Buyers should locate a home in a location they like that also meets their budget. But, if buyers make too many sacrifices to get a home, they may wind up with buyer's remorse. And as agents, it is your responsibility to help your clients get ahead in light of these market trends.
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