If anything, the first quarter of 2022 is edging closer to what a normal housing season/year looks like. As we approach the home buying season, which this year began early, homebuyers still have tough choices to make, but, this won’t feel anything remotely close to what 2021 was like.
Last year, we saw prices shooting as high up as 20% at many points. And while this trend is expected to continue, the rate at which prices appreciate is expected to slow down. Many experts concur price increases will be at roughly half the price we saw during the peak of 2021.
The housing market has suffered and continues to suffer through many of the same problems as the broad economy. This includes the supply and demand imbalance, labor shortages, material shortages and record low inventories. Inflation is another bottleneck plaguing both the economies, but now that the policy makers have recognized that inflation induced problems, the dollar is beginning to diminish. Mortgage rates on the other hand are beginning to rise, further eroding affordability especially for the first time buyers.
The housing projection for 2022 reports that came out earlier showed that the rising mortgage rates would only have modest impact on the demand and while mortgage rates to date haven’t risen that much, buyers still face bidding wars. However, it is expected that the bidding wars will not be as intense as they were in 2021. This comes as a strong warning to the sellers that they should not be as selective when choosing between offers. In 2021, one trend that we saw with most sellers is that they mostly accepted all-cash offers and conventional loan offers with appraisal contingencies waived.
For the buyers, rising interest rates means that you have to be more flexible with the terms of your purchase contract, even if you are not necessarily getting a deal on the price.
Remember, the spring of 2022 will still be a seller’s market, but it will be less competitive for the buyers than the previous spring. There is a high chance that the spring of 2022 will look more like a regular spring season. The number of new and existing inventory for sale will increase, but, it will be lower than what a normal market offers. The mortgage rates will go up which to some extent will significantly affect buyer’s affordability. Thus, understanding your finances is really important as it will help you determine the upper limits of your budget. On the other hand, for sellers, you’ll want to stay ahead of any maintenance upgrades even before putting your home.
Another projection is that home buying demand will fall, but not plummet. Over the last 12 months, we saw many buyers rushing into the market and they are unlikely to be buying another home in 2022. While it’s not expected that there will be a sharp drop in home prices, fluctuations will only be local. Homebuyers need to put more focus on the fundamentals of what makes a home purchase a good move. It is advisable to also interrogate the motive, if buying a home makes sense with your current employment situation and family status, then the timing is probably right, you should buy.
Another not so interesting consequence of the rising interest rate is that there will be a severe shortage of homes for sale relative to demand. This will be the primary driver of positive house price growth. According to Odeta Kushi, deputy chief economist at First American Financial Corporation, a real estate services firm;
“It’s really the severe shortage of homes for sale relative to demand that will be the primary driver of continued positive house price growth,” she says.
Many millennials are hitting the prime buying age, and there aren’t enough homes built to meet this demand.
Many buyers, and it doesn’t matter the generation, looking to make a move this year must be well prepared. And the good thing is that this year, many have a little more time to make up their mind compared to 2021, “but given that it will still be a seller’s market, they’ll still likely have to move fast to keep up with that market velocity,” Kushi says.
going into the market, make sure that you have your budget right and plan ahead of what you are willing to spend for a property. Buying a home isn’t just another financial decision, it is a deciding factor about your lifestyle. As such, buying a home should make sense for your personal and financial situation.
Sources;
https://time.com/nextadvisor/mortgages/mortgage-news/sping-2022-housing-market-predictions/
https://wellsfargo.bluematrix.com/links2/html/b34d5dd7-899a-4583-ae76-3794cd0979b4
