What to Expect from the Housing Market in 2022?February 10th, 2022 by Administrator
The housing market in the United States has had a scorching year. With an expected 6 million homes sold in 2021, home sales are on track to hit their highest level in 15 years. However, whether you gained from the boom was mostly determined by selling or purchasing a home.
In the third quarter of 2021, average property prices increased by about 20% compared to the same period in 2020. It was the greatest annual home price gain in the House Price Index’s history. In some trendy areas, the price hike was even higher.
Homes were also selling at an all-time high, with many sellers receiving several competitive bids and all offers.
It was a different scenario for buyers. While mortgage rates started the year at all-time lows, finding a property to buy proved challenging. In early 2021, the supply of available properties reached an all-time low, and competition was fierce.
Many potential purchasers exited the market disappointed and without a place to call home. As a result, rental demand skyrocketed and rents increased across the country.
The housing market in 2021 was a roller coaster ride. Here’s what to expect in 2022:
There Will Be No More Historically Low Mortgage Rates.
The year 2021 began with the lowest interest rates on record, with an average rate of 2.65 percent for a 30-year fixed-rate mortgage. They didn’t last long, though.
In 2022, rates are expected to rise even further. Through the first two months of 2022, mortgage rates are expected to continue in a tight range of around 3%. And by the end of 2022, the 30-year fixed mortgage rate may rise to 3.7 percent, but it will still be lower than the pre-pandemic rate of roughly 4%.
Mortgage rates will rise, and inflation will eat away at savings. That will put a strain on buyers. It will affect lower-priced and median-priced home buyers than luxury property buyers.
Inventory Will Be Scarce.
In 2021, more properties became available as the spring house-buying season heated up.
Because there were so few properties available, people went to extremes like offering to buy the seller’s next home, paying thousands of dollars to compete buyers to walk away, and paying up to $1 million over the asking price.
The lowest end of the market saw the most inventory shortages. Residences under $200,000 have been scarce, with the number of available properties declining 19 percent in 2021 compared to 2020, while homes over $600,000 saw a 40 percent yearly increase.
While inventory is predicted to improve in 2022, it isn’t expected to improve significantly. In 2022, properties will remain constrained, increasing by only 0.3 percent
Low inventory will be the most significant issue affecting the housing market in 2022. While inventory remains low, buyers will grow acclimated to the scarcity of options and will continue to fight fiercely for homes. Prices will continue to rise as long as this occurs.
Home Prices Will Continue to Rise.
The typical price of existing homes rose to $353,900 last November, up 13.9 percent from 2020. While prices aren’t predicted to increase at the same double-digit rate as in the previous year, they are expected to rise at a more moderate rate in 2022.
In 2022, the median home price will rise by 5.7 percent. As the Fed attempts to control inflation, the housing market and the broader economy will normalize in 2022.
Buying a Home for the First Time Will Be a Challenge.
Due to the overwhelming number of all-cash bids, a scarcity of available properties, and soaring prices, many first-time buyers left the market in 2021.
Not only were prices rising faster than consumers could save for a down payment, but many popular mortgage types for first-time buyers, such as FHA and VA loans, were being replaced by all-cash agreements or conventional loans.
In the $100,000 to $250,000 bracket, the number of sales dropped over 20% because the supply of properties was so scarce.
While newly built homes are finally starting to hit the market, most of them are priced much over the average first-time homebuyer’s budget.
Many potential purchasers claim they will return in the spring, armed with the knowledge garnered through a frustrating search in 2021.
Despite a challenging year, hopeful first-time homebuyers are optimistic about 2022. They see the new year as a chance to realize their dream of owning a home.