The Covid-19 pandemic has turned the home buying process upside down. Historically low mortgage rates combined with a shortage of inventory created a red-hot market where homes were selling within hours of being listed, often well above asking price.
Nobody knows exactly what the future will bring. But real estate experts tell CNBC Make It that buyers can expect similar trends in 2022 to those seen over the past two years: elevated prices, low inventories and fast turnaround.
That said, while it will remain a seller’s market — property values are expected to rise by double digital percentage points, Zillow predicts — it won’t be quite as wild as this year, says Skylar Olsen, chief economist at Tomo, a homebuying app.
“None of us can promise that [finding] Housing will be easy,” says Olsen. “But it seems reasonable to promise that it will be easier than it was last year.”
With that in mind, here’s what you should know if you’re looking to buy a home in 2022.
Stocks will remain scarce
Even before the pandemic, the country had a low housing stock. And the supply chain problems of Covid-19 and a labor shortage have only made things worse. Although construction companies are trying to ramp up production, inventories will remain tight.
In fact, the number of active homes for sale fell to a record low in late November, reports CNBC. While spring and summer will likely see more supply than usual, Zillow research says it’s unlikely there will be enough to meet demand.
“The gap narrowed in 2021 and is likely to narrow again in 2022, but the housing shortage will again be a defining feature of the market next year,” reads Zillow’s 2022 Housing Outlook.
Interest rates will rise
The Federal Reserve is expected to hike interest rates a few times in 2022, meaning mortgage rates are likely to rise. Both Redfin and Realtor.com predict that the interest rate on 30-year fixed-rate mortgages will reach 3.60% by the end of 2022, compared to the current average of 3.30%.
That’s not necessarily bad news for buyers, Olsen says. The “silver lining” of higher mortgage rates, she says, is that there will be fewer speculative buyers in the market because there will be less money to be made. That might help the average person.
“If you have higher interest rates, more people will buy houses just to live in them,” says Olsen. “The market will benefit from this when it returns to sanity.”
Prices will not go down
Those hoping that competition will slow down in 2022 are out of luck, according to economists at Zillow and Realtor.com. Economic trends such as tight supply, increased demand and low mortgage rates will continue to give sellers the upper hand.
Potential buyers can expect bidding wars for many houses, especially in spring and summer. Although no one can predict exactly what will happen, the trends listed above mean that prices will continue to rise. In fact, Zillow projects property values to rise 11% in 2022 — not as much growth as in 2021, but still significant.
Young buyers are disadvantaged
Millennials, who are past the prime age to own a home, will remain at a disadvantage compared to older generations when it comes to home buying, says Olsen.
This is not only because homes are so much more expensive today than they were when baby boomers and older generations bought their first homes, but also because boomers are staying in their homes longer as they live longer.
That means more first-time buyers are likely to need financial help from family and friends to make a down payment, Olsen says. Obviously that will limit who can buy a home.
Housing affordability in the US has been an issue for buyers, particularly young buyers, for some time. But the problem has only worsened since the outbreak of the pandemic and will continue.
Buyers should be prepared
All of that said, experts say, be prepared. Do your research ahead of time so you can get started as soon as you find the right listing.
“If you’re buying a home in the next year or more, it’s important to monitor new listings, including those that are available soon, and be very prepared not just to tour the home quickly, but to prepare for it.” to decide and expand an offer almost immediately,” Glenn Phillips, CEO and principal economic analyst at Lake Homes Realty, previously told CNBC Make It.
That means don’t pay too much. Prices will go up, but that doesn’t mean picking something that’s reasonable for your budget.
Compare last year’s property prices in your area with the listings you are currently considering. If the same type of house is offered at a significantly higher price, it makes more sense to wait for something else.
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