Our Predictions for the 2022 Market
Last year’s real estate market was volatile to say the least, and a lot of people are wondering what 2022 is going to be like. Today we’ll talk about four metrics to keep an eye on this year:
1. Interest rates. 2021 saw historically-low interest rates between 2.5% and 3%. That made home affordability the best it's been in 30 years despite prices being at an all-time high. The Federal Reserve kept its funds rate at 0% to combat inflation. That caused institutional investors to put their money in U.S. Treasury Bonds, which kept interest rates at bay.
However, the Federal Reserve said that they're going to have three to five rate hikes this year. This will indirectly impact mortgage rates. On the other hand, the growing conflict with Russia may spook investors out of international investments and cause them to put their money into treasury bonds, which could suppress interest rates.
2. Appreciation. On average, home prices went up 18.5%. For context, the historical norm is 1% to 2% above the rate of inflation, which is normally around 3%. The real estate market usually sees an appreciation of 4% to 5%. Rising interest rates will lower affordability and slowly lower prices. Data is still suggesting that 2022 appreciation will be about 6% to 7%.
"You can still expect 2022 to be a competitive market."
3. Supplies. Nationally, there were over 50% fewer homes available for sale in 2021 compared to 2019. That's a lot of inventory to make up, and it won’t happen overnight. Things will remain unbalanced for years still as new homes get built. This was a growing issue long before COVID, but the supply chain and labor problems of the last year have compounded these issues.
4. Demand. National home sales are up 20% from pre-pandemic levels in 2019. The Build Back Better Program will increase access to homeownership through down payment assistance and the construction of 150,000 affordable homes for low-income households. That being said, it won’t quell buyer demand like some people are expecting. People are moving out of populated areas because businesses are allowing them to work from home.
Things are changing rapidly, but you can still expect 2022 to be a competitive market. If you're getting in the market and wondering how it’ll impact your situation, don’t hesitate to reach out to us by phone or email. We'd be happy to help you navigate this market.