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Trends Affecting Buying or Selling a Home in 2022 |

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Last year’s perfect storm of supply constraints, low interest rates and record demand caused house prices to rise sharply. Five clear trends are emerging that will help homeowners decide if they want to engage in the real estate market this year after the median U.S. home price hit an all-time high of $404,700 in the third quarter of 2021. C That was an increase of nearly 20% over the same period in 2020 according to the US Department of Housing and Urban Development.

If you’re looking for relief in the crowded and competitive housing market in 2022, there may be hope in sight. “With more housing inventory on the market, the intense multiple offers will begin to subside,” according to Lawrence Yun, chief economist of the National Association of Realtors. “House prices will continue to rise but at a slower pace.”

Whether you’re planning to buy your first home or you’re a real estate veteran, here are five real estate trends to watch in 2022.

1. Mortgage rates will continue to rise

After hitting a historic low of 2.65% in January 2021, mortgage rates have risen. At the end of 2021, the average 30-year fixed-rate mortgage stood at 3.05%, according to data from Freddie Mac.

Most economists expect rates to continue rising modestly in 2022. Redfin Chief Economist Daryl Fairweather predicts mortgage rates will rise to 3.6% by the end of 2022. While rising rates can be scary, keep in mind that rates are still at historic lows. . Before the Great Recession of 2008, mortgage rates never fell below 5%.

What does this mean for home buyers? Assuming rates rise 3% to 3.6%, a $300,000 loan will cost buyers $100 more per month.

2. Buyer demand, competition will decline

In 2021, an unprecedented increase in buyer demand resulted in part from a lack of inventory, work-from-home trends and supply chain constraints limiting new construction. But Fairweather sees a shift towards a less frothy market. “2022 will bring more balance to the housing market,” she says. “But don’t expect a buyer’s market; just more choice, less frenzy and slower price growth.”

Fairweather continues, “Slow price growth will likely discourage speculators from entering the market and allow more first-time buyers a chance to win a home.” This can be good news for new buyers who are exhausted by the pace of price increases and frustrated by multiple offer situations.

3. Home value appreciation will slow

Economists generally agree that the torrid pace of home price appreciation will slow significantly in 2022. Notably, most economists do not expect prices to decline, only a slowdown in current trends.

An NAR survey of more than 20 economic and housing experts predicted annual median house prices would rise 5.7%, much less than the previous year. “Overall, survey participants believe we will see the housing market and the economy in general normalize over the next year,” said NAR chief economist Lawrence Yun. “The slowdown in price growth will be partly the consequence of interest rate hikes by the Federal Reserve.”

If the 2022 predictions come true, buyers and sellers can benefit from a more stable market, allowing for better planning and budgeting. In the latest report from the Federal Reserve, the real estate component of household net worth increased by $1.4 trillion, mainly due to higher house prices. Although real estate price appreciation is good for net worth, annual payments due to increased principal, interest, taxes and insurance can cause overall housing costs to be a percentage largest part of the household budget.

4. Construction of new homes will increase

In 2021, construction supply and labor shortages have contributed to homebuilders’ inability to meet new construction demand. Mike Fratantoni, chief economist of the Mortgage Bankers Association, sees the supply shortage beginning to ease in 2022, driving additional inventory into the market. “Homebuilders will have more success overcoming current shortages of building materials and should be able to increase the pace of construction to meet significant buying demand,” he said.

Fratantoni noted that this is good news for home buyers. With more new construction on the market, he expects price growth to slow. “This is good news for the many potential buyers who are currently overpriced or delaying their decisions due to low supply and strong house price appreciation.”

5. Investors will continue to buy

According to Danielle Hale, chief economist at Realtor.com, as home prices and rents rose in 2021, real estate investors continued to be net buyers of single-family homes. “In 2022, investors will continue to see strong returns from their investments in the housing market,” she noted in her National Housing Forecast 2022. “2022 will be a great opportunity to receive strong returns given solid demand and the expected increase in rental prices.”

Most pandemic-era eviction protections have been lifted, and 2022 could offer a glimpse of a more typical return to supply and demand in the rental market. By all accounts, real estate investments have seen a major boom during the pandemic, with REITs up almost 29% last year.

Be ready to buy or sell in 2022

Regardless of housing market trends and forecasts, it’s a good idea to prepare before buying or selling a home. Danielle Hale recommends buyers carefully consider their budget before starting a home search. Rising mortgage rates and rising prices will affect affordability and monthly payments, so it’s a good idea to stick to a predetermined budget.

Homeowners preparing to sell are well positioned for 2022. Home values ​​should continue to rise, albeit at a slower pace. As the market begins to stabilize, Hale notes that sellers should be prepared for potential competition, but reasonably priced homes will continue to sell quickly in many markets across the United States.