2022 housing trends: The real estate frenzy is expected to ease
The real estate market has been nothing short of a wild ride for both buyers and sellers since the start of the coronavirus pandemic. Record price appreciation, rock-bottom mortgage rates and cutthroat competition among buyers have prevailed for the better part of two years.
The good news, experts say, is that 2022 may finally bring more equilibrium to the industry. It may not be fully back to the pre-pandemic normal, but it should be a little less crazed.
Here are the key trends to look out for if you’re considering buying or selling property this year.
Mortgage rates will rise
Mortgage interest rates reached all-time lows in early 2021, with new 30-year fixed loans averaging less than 3 percent in some weeks.
Bankrate has a full analysis of what to expect from mortgage rates this year, but the key thing to know is that those record lows are almost certainly behind us.
“Mortgage rates are expected to slightly move up, to an average of about 3.5 percent,” Gay Cororaton, senior economist and the director of housing and commercial research with the research group of the National Association of Realtors (NAR) says.
And while that means refinancing opportunities for existing homeowners may dwindle in the new year, borrowing will still be affordable for most new buyers.
“That is still low by historical standards,” Cororaton said. “Prior to the pandemic, mortgage rates were hovering around 4 percent.”
Smoother supply chains mean more home sale listings
Part of the reason for the hypercompetitive pandemic housing market was builders struggling to get materials as global supply chains slowed. That meant newly-built homes were slow to come on the market, which was compounded by hesitance on the part of existing homeowners to list during lockdowns.
“We still have historically low inventory levels because things are selling faster than we can keep pace,” said Jim Napier, CEO and principal broker for Napier Realtors ERA.
Assuming the worst days of the pandemic are behind us, home inventories should grow in the year ahead.
“Barring any major resurgence of the pandemic that could lead to closing of manufacturing plants, we expect supply chain issues to ease in 2022,” Cororaton said.
“That will start bringing more rooftops to the market, which will hopefully help things a little bit,” Napier added.
Aside from newly-built homes, existing homeowners should feel more comfortable listing their properties if the pandemic remains relatively well-managed.
“People did not want to list during COVID. If those people feel comfortable to sell, we could see an increase in inventory because of that,” said Alex Cruz, 2021 national vice president of the LGBTQ+ Real Estate Alliance.
One thing that won’t boost supplies? A post-forbearance foreclosure trend that’s looking more like a few ripples than a tidal wave.
According to NAR, just about 10 percent of buyers who exited forbearance sold their homes, and an even smaller subset of that group went through foreclosure. So far, about 200,000 pandemic forbearances have ended with the homeowners having to move somewhere else — a drop in the bucket when home sales are expected to hit 5 million in 2022.
Price stability and less homebuyer competition
Buyers, rejoice (and sellers, don’t fret too much).
The intensity that has characterized the real estate market recently should ebb this year, giving would-be buyers a better shot of making it to closing, while sellers should have a little less opportunity to get their adrenaline pumping.
As more listings hit the MLS the market should be a little gentler on buyers.
“Prices will start to moderate,” Napier said. “I don’t think any industry can sustain double digit price increases year-over-year.”
That moderation may help offset rising mortgage rates, too. Cororaton predicted that home prices should grow by around 5 percent in 2022, down from 15-20 percent in 2021. She pointed out that prices rose by slightly less than 5 percent in the years prior to the pandemic, so a more normal pattern seems to be in the wings.
That’s good for sellers because it means they likely hold onto their equity gains, but it may require some recalculation when it comes to weighing offers.
“Their house could spend a little more time on the market. Don’t necessarily expect to sell your house within 24 hours,” Cruz said. “You had a friend who sold their house in a day that had 15 offers and sold for $80,000 above list. I don’t anticipate that going forward.”
He added that buyers will also have a little more leeway to be pickier this year.
“Last year, people were putting houses on the market that weren’t high-caliber houses, just trying to make money off of it,” Cruz said. “That probably won’t be happening in the future.
Shifting homebuyer preferences
Some pandemic trends are here to stay, however. Newly-flexible work arrangements for many are changing what people look for in a home.
“The opportunity to work from home will be a main driver,” Cororaton said. “Less-expensive areas in the Sun Belt will perform better than the more-expensive markets.”
And it’s not just geographical preferences that have shifted. Working from home means buyers are looking for different layouts than they were before the pandemic.
“A lot of people were shifting away from the open concept,” Cruz said, because noise carries more easily between rooms without doors when a whole family is working from home.
Advice for buyers and sellers
No matter the market conditions, the basic advice for people looking to buy or sell property remains the same.
“It’s important in this market to be prepared,” Napier said. “Get with your realtor, understand the market, have them advise you on the market dynamics of the community you’re in.”
Having a knowledgeable agent at your side will make navigating listings or offers much easier.
This year should feel a little more normal to experienced real estate shoppers — or noticeably calmer if you’ve only experienced the pandemic market so far.
Cororaton said she advises people not to worry too much about what the experts are saying in any year though, and instead to focus on their own situation and needs.
“If you have the down payment right now and you think that you are in the stage of your life where it is time for you to buy a home, buy a home,” she said. “The sooner you buy a home, the sooner you start reaping home equity gains,” she added. “We will see higher interest rates in 2023 compared to 2022, so it is better to buy a home in 2022.”
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