Housing Market Trends We Expect in 2022

The pandemic and resulting lifestyle and economic trends have shifted the housing market this year. From low rates to a hefty increase in prices, the housing market remains competitive. As a result, many potential homebuyers are waiting to purchase a new home until next year.

Sellers are likely to still find the market friendly for home staging, selling and moving in the year ahead. The question that remains is what will the housing market look like for 2022? Let’s find out below.

A Potential Increase in Mortgage Rates

Mortgage rates are expected to increase higher than they currently are now. As of now, the average rate is around 3.20% for a 30-year fixed loan and is expected to keep rising at the start of the new year.

In 2022, the average rate of a 30-year fixed loan will rise to 4%, according to the Mortgage Bankers Association. As a result of this increase, mortgage experts say this will create a significant drop in refinancing.

“Rising interest rates will result in a sharp drop in refinance demand in 2022, meaning a lot less business for mortgage bankers, according to the Mortgage Bankers Association’s just-released annual forecast. It predicts total origination volume will drop 33% to $2.59 trillion,” says Diana Olick of CNBC.

As rates continue to rise, this could mean the housing market will slow down. Borrowing costs could increase in the following months, which means a decrease in demand from home buyers. This factor is one thing to look out for since it could affect the real estate market for 2022.

Once you see a steady rise in housing prices, the drop in demand could also be more significant.

Housing Price Predictions for 2022

Housing prices have kept rising since the start of 2021. As time goes on, the prices of homes are likely to keep increasing. However, there is some light to shed on this matter. Housing prices are expected to slow down, which will enable homebuyers to close on more deals for the time being.

Experts say that home prices are expected to continue to rise due to a limited supply. The limitations in supply are likely due to fewer homes being up for sale. Seasonally, the winter months already cycle through low construction periods — even ongoing building projects see more delays as home construction companies work to winterize necessary equipment and accommodate health and safety in winter conditions.

Unique to 2022 will be the ongoing impact of the pandemic on construction supply chains and home construction. Labor crunches and higher materials prices will exacerbate the seasonal delays construction is facing, which impacts the housing supply hitting the market this year.

Despite the potential slowdown in housing prices, home values are likely to keep rising to a certain level. As a result of these increases, it makes more sense to invest in a home now rather than later. If you intend to wait further on purchasing a home, you’re likely to pay higher prices and mortgage rates.

Housing Inventory Remains an Issue

As mentioned previously, there is a limited supply of housing, which has caused a shortage over the last few years. As the trend continues, this could present challenging times for 2022 as well. However, the good news is that the housing shortage will not last forever.

As Miriam Moore explains in a Forbes article, “We’re already starting to see it. Slowly, more inventory is organically being added to the MLS. That is helpful, but investors may also want to keep an eye on what’s happening in the default space.

“There are currently about 1.6 million homeowners in some phase of the forbearance process. More than half (850,000) will be exiting forbearance between now and the end of October. That will leave these homeowners with important decisions that could impact the housing market.”

As you can tell, the housing market is very complex. With a gradual rise in inventory, new construction could bring in some relief to home buyers. However, supply chain disruptions still remain an issue for the real estate market in 2022.

What the Housing Market Looks Like for Renters vs. Buyers

As for the housing markets across the U.S., renting is currently in favor because of monthly costs. The nation has seen rental prices move in different directions. In some housing markets, a drive in demand has increased due to population growth.

An increase in demand has raised the costs of rent. However, other cities have seen a significant drop in rent.

Overall, though, the increase in house pricing still outweighs the increase in rental pricing. This factor means the housing market is seeing more renters than buyers for those who are cost-conscious. Furthermore, you will likely see this trend continue in 2022.

Between the hike in prices, an increase in mortgage rates, and supply chain disruptions, renting is looking like a more favorable option for potential home buyers.

What Should the Future Hold for Home Sellers?

Despite the outlooks of the housing market for 2022, don’t let these predictions stop you from buying or selling a home. Depending on where you stand financially, you can make a practical decision on whether home buying is right for you.

Trying to time the market isn’t usually a great long-term game, so take the time to sit down with experts you trust and plan out your personal goals to the best of your ability.

Article submitted by Evelyn Long, Renovated.