The 2022 housing market: No relief in sight for frustrated buyers
If you’ve waited to buy a house in an attempt to avoid the market madness of 2021, we commend you on your patience and on what would—in normal times—be a wise move. Unfortunately (for home buyers, at least), times are far from typical. We hate to be the bearers of bad news, but the real estate market doesn’t appear to be cooling. At all. Not even a little bit.
As 2022 dawned, most experts expected last year’s buying frenzy to subside. After April 2021’s mad dash, when a whopping 72% of sellers saw a bidding war on their house (according to Redfin), it was logical to predict that this kind of market couldn’t sustain itself.
Experts know a lot, but they’re still people. And people, of course, are fallible. We take a guess—er, make a ‘prediction’—and sometimes we’re wrong. With the buying season ramping up, it’s looking like many experts were indeed wrong.
As Devyn Bachman, VP of research at John Burns Real Estate Consulting recently told Fortune magazine: “Spring buying has sprung, and it’s wild and it’s crazy out there. It is causing some frustration at this point in the real estate market,” Bachman said.
If you’re feeling that frustration, read on. We’ll shed light on what’s happening and why, along with (perhaps most crucially) when it might change.
What factors are staying the same?
It’s basic economics. Low supply and high demand lead to higher prices.
Inventory remains low.
Even before COVID-19 was on the scene, housing inventory levels were low. The resulting buying surge has only exacerbated the situation. When the vaccine became widely available, we expected to see older homeowners who had been waiting out the virus list their homes. While we did see an inventory uptick in November 2021, it was slight and short-lived. People are opting to stay longer in their homes.
Naturally, builders would love to take advantage of the buyers clamoring for properties. Yet ongoing supply chain issues, rising prices and lack of available labor have snarled that effort.
“This is a reminder that COVID-19 still holds sway over the recovery,” Oren Klachkin, lead U.S. economist at Oxford Economics in New York, told Reuters. “U.S. supply chain dynamics didn’t improve at the end of 2021, and early data suggest they’ve only worsened in 2022.”
Prices remain high.
We don’t need to say much here. Fewer homes and more buyers mean the buyers pay more, sometimes a lot more. In fact, 2021 home prices were 18.8% higher. For reference, average growth from year-to-year is around 2%. Yikes.
What factors might change?
What’s most likely to change and have an appreciable effect on the real estate market? Mortgage rates. During the early days of the pandemic, record low interest rates were a big part of why the housing market didn’t see the slump experts thought it would (Oops! Wrong again, experts.).
Now, however, as we wait for the rate increase we’re almost sure is coming from the Federal Reserve, mortgage rates are creeping up. According to Freddie Mac, buyers in December 2021 were paying an average of 3.11% on a 30-year fixed rate mortgage. Already in February 2022, rates are over 4%.
If this trend continues, it could price more buyers out of the market.
Where does that leave us?
Well, it’s hard to say. Since we can’t entirely predict just how short inventory will remain or just how high interest rates will go, it remains a guessing game. Suffice it to say that to buy a house in 2022, you should expect to move quickly with your offer and pay more than the asking price.
It kinda makes moving back in with your folks more attractive than ever, doesn’t it?
(5) No
(2)
Comments (0)