As the year winds down, it’s time to look forward to what the year 2022 has in store for the housing market. Which trends are garnering momentum? What are the expert predictions for the real estate market in the coming year?
Whether you’re looking to buy a home or sell your house, here’s what to need to know about the latest happenings and emerging trends that may define the 2022 housing market. We draw on our experiences and the opinions of industry leaders to offer a peek into the near future of the real estate.
Hindsight 2021 – A Resilient Housing Market
The real estate market in 2021 was harrowing for homebuyers and a welcomed surprise for home sellers.
Even with the odds seemingly stacked against the housing market (especially during the pandemic), it’s been gaining strength over the last few years. In 2021, home price appreciation skyrocketed, mortgage rates hit rock bottom figures, and the low supply of homes meant that buyer demand was hotter than ever leading to heated bidding wars.
The impact from the pandemic was less than the real estate industry expected at this point last year. Now the industry should use its good fortune toward both preparations for continued uncertainty and making strides toward ESG improvement
While the housing market is still hot—with sellers raking in the bucks—current trends suggest that it’s beginning to cool off. As covered in a previous post, you should expect fewer bidding wars, increased housing supply, and adjusted home prices going forward.
What to Expect in the 2022 – Housing Trends
Emerging real estate metrics are gradually swinging in the homebuyers’ favor. For anyone looking for a new home, this is a reprieve from the sellers’ market witnessed in the last year. Here’s more on why homebuyers should be (somewhat) optimistic for the coming year:
1. Expect More Choices – Bidding Wars to Cool Down
You’ve likely heard of the fierce bidding wars, whereby would-be homebuyers fought tooth and nail in an attempt to outbid other offers for the last house on the block. This hypercompetitive market saw homebuyers ponying up exaggerated sums or even forgoing inspections to seal the deal.
According to data from Realtor.com, this red-hot housing market is starting to wane. Expect a more ‘normal/balanced’ offer and bidding process in 2022 as housing inventory continues to tick up from consistent lows. More choices mean less stress for prospective homebuyers.
2. Suburban Real Estate to Remain Hot?
Remote working is here to stay. And as both employers and employees increasingly favor work-from-home arrangements, homeowners are migrating from high-priced city centers to the suburbs.
Part of this trend has to do with a flood of millennials who are entering the home-buying market. As millennials get older they’re transition from a “renter generation” to homeowners—with most preferring to move from larger cities to more laid-back regions like the suburbs.
3. Home Prices to Stay High?
The bidding wars may be calling for a timeout, but this doesn’t necessarily translate to a price drop. Would-be homebuyers might still have to pay top-dollar for their dream home in the coming year.
Experts from Zillow expect home values to grow as much as 12.1% in the year leading to July 2022. CoreLogic HPI Forecast offers a more subtle prediction with home prices increasing at a rate of 2.2% between August 2021 and August 2022. However, home prices appreciation is expected to taper off from the scorching levels seen in the last year.
4. Mortgage Rates to Tick Up from their Record Lows
According to the Mortgage Credit Availability Index (MCAI) by the Mortgage Bankers Association (MBA), credit availability is on an upward trend—indicating that lending standards are loosening. This means that getting a mortgage is easier for would-be homeowners.
Mortgage rates hit record lows in the 2020 and 2021 housing markets, which partly contributed to the frenzy of aspiring homeowners looking to capitalize on the sweet deal.
While the low rates are expected to continue into 2022, early predictions suggest that they might tick back up gradually. Although such a development would dampen housing market activity, a report by Freddie Mac suggests that “purchase demand remains firm, showing that latent purchase demand exists among consumers.”
5. Smaller Homes on the Rise
Emerging trends suggest that new homeowners are seemingly finding value in smaller homes. According to the August 2021 Monthly Housing Market Trends Report by Realtor.com, housing inventory is shifting towards smaller homes.
“Looking at the single-family home category alone, the share of homes having between 750 and 1,750 square feet increased from 30.6% in August 2020 to 37.0% in August 2021, while the inventory of homes having between 3,000 and 6,000 square feet decreased from 23.9% to 19.3%.”
6. Rents Are Skyrocketing
As the market gradually recovers from the effects of the pandemic, rents are increasing after months of stalled growth. Realtor.com reports that rent growth hit double digits (11.5% Y/Y) in August 2021—outpacing home price growth (8.6%) in the same period.
The Bottom Line
The tides are turning in favor of would-be homeowners. Although the housing market in 2022 will likely still be a seller’s market, expect it to be friendlier to buyers.
But if there is anything that we can learn from 2021, it’s that the housing market is always in flux. And when you throw in the fact that the real estate industry is highly localized, you see the value of always staying on top of trends.
Whether you’re in the market for the home of your dreams or you’re looking to move/renovate, let’s connect to discuss how you can best navigate today’s and tomorrow’s housing market. Give us a call: 434-270-8839.
