Real estate predictions are difficult in any year. But in a year already marked with major and tragic global events, predictions are less certain.
As 2022 began, changes that would affect the national housing market were taking shape. The disruption of COVID-19 appeared to be ending. Inflation was rising and interest rate hikes were planned. Housing experts were beginning to say the real estate market would “normalize.”
So what should we expect for this year’s real estate across the nation?
The 2022 nationwide housing forecast by Realtor.com showed a continued slowing from the spring 2021 frenzy. But much is expected to stay the same, according to Realtor.com: Prices will stay high and inventory tight, even while mortgage rates rise.
It points to continued challenges for buyers – especially first-time buyers.
“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”
There are some moderately silver linings for buyers. For example, while home prices are expected to stay high, the rate of increase will slow. Realtor.com economists anticipate prices increasing at a much slower rate of just 2.9% over this year.
“The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes,” says Hale. “With prices high and mortgage rates beginning to tick up, people won’t be able to be as aggressive in what they’re willing to pay.”
Inventory will continue to be challenging. Realtor.com says the number of homes for sale will rise a mere 0.3%. Supply chain shortages of materials and labor supply will hamper housing construction. And the available housing stock for sale is being depleted as investors convert existing single-family homes into rentals.
Plus, demand is outpacing supply as 45 million millennials — aged 26 to 35 — enter their prime home buying years and seek to satisfy their quest for the long-held American dream. Unfortunately, first-time homebuyers won’t get much relief: Bidding wars and above-asking-price offers will be present once again in 2022.
Hale points to the shortage of homes for sale — more than a decade in the making — as one factor keeping home prices high. Despite the inventory shortage, nationwide home sales will reach a 16-year high as they go up by 6.6%, writes Realtor.com.
The popularity of suburbs as a choice for homebuyers is expected to continue, which will keep prices high in desirable locations. Suburbs rose in popularity during the pandemic, when buyers sought suburban locales in search of bigger homes and yards. The remote work trend that fueled migration to the suburbs is likely to continue. Even before the pandemic, millennials chose the suburbs as they searched for a place to raise a family.
Mortgage rates will leave their longtime lows, as the Federal Reserve raises interest rates. Following a low of 2.65% in January for 30-year fixed rate loans, Realtor.com expects mortgage rates to rise 3.3% on average and reach around 3.6% by year-end.
“I know a lot of people are expecting housing prices and sales to peak and then decline. Instead, I think there’s enough momentum from these younger buyers who want to get into the housing market to keep sales moving forward,” says Hale. “They are going to succeed because that drive to buy a home and make it happen when you’re ready is really strong.”
Finally, there is good news. Higher mortgage rates could help slow price growth, especially when increasing rates are coupled with inflation.
Read the full story at realtor.com/news/trends/what-to-expect-in-2022-housing-market.
By Tom Kalinski. Tom is the broker/owner of RE/MAX of Boulder, the local residential real estate company he established in 1977. He was inducted into Boulder County’s Business Hall of Fame in 2016 and has a 40-year background in residential and commercial real estate. For questions, e-mail Tom at [email protected], call 303.441.5620, or visit boulderco.com.