A combination of factors such as low-interest rates, record-high demand, and supply constraints caused home prices to rise significantly last year. Five key trends are expected to influence the real estate market this year.
Looking ahead to 2022, the number of houses on the market should start to ease. He noted that the intense bidding wars might eventually subside. Despite the slow recovery in the housing market, home prices might still continue to increase.
If you’re planning on buying or selling a home in 2022, here are five real estate trends that will influence the market in 2022.
Rising Mortgage Rates
After reaching an all-time low in January of 2021, mortgage rates started to rise in late 2021. The average 30-year fixed-rate mortgage rate was at 3.05% at the end of 2021.
Most economists predict that mortgage rates will increase in 2022, and that has already proven true. Current increases, intended to help curb the effects of inflation, have brought the average rate over 5%.
Due to the lack of inventory and the constraints caused by the construction industry, the housing market experienced a record-high demand in 2021. However, the real estate market will start to stabilize in 2022. Instead of a buyer’s market, the housing market will start to have more selection and slower price growth.
Low price growth will encourage more first-time buyers to enter the market and allow more people to have a chance at purchasing a home. This will be welcome news for those who are tired of waiting for a home to sell.
Slower Home Value Appreciation
Economists generally agree that the rapid increase in home prices will slow down in 2022. Although they do not expect a drop in prices, they expect a slower appreciation rate.
A survey conducted by the National Association of Realtors revealed that experts predict that the median home price will increase by 5.9% in 2022. However, this figure is significantly lower than the 15.5% increase recorded in 2018. The slowdown in price growth is expected to be caused by the Federal Reserve’s interest rate increases.
The stable market in 2022 will allow people to have a better understanding of the buying and selling process. According to a recent report by the Federal Reserve, the value of real estate increased by $1.4 trillion in 2018. However, this increase can only be beneficial for net worth since it allows people to reduce their monthly expenses. However, it can also lead to higher payments due to rising taxes, insurance, and principal.
Increase in New Construction
Due to the lack of supply and the labor shortages experienced in 2021, the construction industry was unable to meet the demand for new homes in 2021. However, the building supply shortage will start to ease in 2022. This will allow home-builders to increase the pace of their construction.
The increase in new construction will allow home buyers to get a better deal in 2022. However, the slow-down in price growth will also benefit those who are still waiting for a home to sell.
Continued Purchases from Real Estate Investors
Investors continued to be active in the housing market in 2021. They will continue to receive solid returns from their real estate investments in 2022. Rising rents and home prices will provide investors with an opportunity to get high yields.
After the eviction protections were lifted during the pandemic, the rental market is expected to return to a more typical supply-and-demand model in 2022. According to reports, real estate investment trusts (REITs) experienced a significant increase in their performance during the pandemic.