Looking back over the last two years, we have seen a lot of changes take place in the Housing Market. From the way houses are sold to mortgage rates, from home values to inventory, it is clear that the market has adapted to the many shifts that have taken place. The pandemic being a driving force behind new patterns and consumer behavior, these changes may be more permanent than we first imagined. What are some of the shifts that caused a major impact to the real estate industry this year? What will fade away and what is here to stay?
Expert Predictions for 2022
Working from home has become a major shift that seems to be around for good. Spending more time at home has caused homeowners to reevaluate what is important in their living space, and a home office has become a necessity for many workers. The pandemic has prompted more people to cook their own food, garden, and enjoy their leisure time at home. As a result of these factors, along with the rise of monthly rent, living within city limits has become less of a necessity. Potential homebuyers expanded their search to the suburbs for more affordable homes with extra space. To this extent, the length of homeowners staying in their homes has seen movement. For homeowners, the amount of years spent in a home went from 10 years to 8 years on average. For new home buyers, the tenure is up to 12 years or longer according to the National Association of Realtors.
Lawrence Yun, chief economist for the NAR states: “mortgage rates will drift higher as the Fed scales back the purchase of the mortgage-backed securities and raises short-term interest rates, which are likely to hit 3.7 percent by the year-end 2022 on a 30-year rate after hovering at 3 percent for most of 2021.” The increase in rates will create the slow down in rising home prices. This could bring more optimistic opportunities for first-time buyers to secure a home rather than get bought out of the market.
With more Millennial homebuyers moving from the sidelines and into the market, with GenZ not far behind, high buying demand is expected to sustain. Inventory will continue to be on close watch in 2022.
Available inventory is moving towards normalcy but industry professionals see it taking a long time to reach pre-pandemic levels. Supply will continue to slowly increase. Single-family home starts are expected to see a small uptick of five percent in availability. Homebuilders continue to ramp up production in 2022 to meet demand. Supply chain issues and shortage in labor will bring delay and challenges to new home construction.
Between rising mortgage rates and home prices, affordability will continue to be a challenge alongside supply through next year.
Home prices increased to historic highs in all markets across the nation for 16 consecutive months. Prices reached almost 20 percent gain year over year. By quarter four this year, major markets began to see home price growth cool off — typical during this time in a standard market. Though the spring and summer market created a 19.5 percent gain from September 2020 to September 2021, there was only a slight 1.18 percent jump on a monthly basis for September. Industry leaders’ forecasts are on a wide scale: Sources like Zillow, Goldman Sachs, Freddie Mac, and Fannie Mae lean on the higher end, ranging from 7 to almost 14 percent gain next year. While others like Realtor.com, CoreLogic, and Redfin only predict a 1.9 to 3 percent climb. Experts find increasing prices unlikely to sustain into 2022, but only time will tell where home prices will go.
The only safe conclusion is that unpredictability will continue to lead the housing market. It is important to connect with your real estate and mortgage professionals for the most up to date research in your local market. Stay knowledgeable on your personal finance and refine your homeownership goals so that you can be prepared through whatever the market may bring.
*This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written by Sparkling Marketing, Inc., with information from resources like Fortune, MarketPlace, Forbes and Yahoo News.