Now the housing experts say the market is “normalizing.” But what does that mean? Will home prices and rents finally come down? Will more homes go up for sale? And what does the year ahead have in store for the real estate market?
The Realtor.com® 2022 housing forecast anticipates the market will continue slowing down from the frenzy seen in the spring when prices shot up to new heights. However, prices will stay high, inventory will remain tight, and mortgage rates will rise.
The bottom line: Even as the market calms down further, it’s still expected to be challenging for buyers, especially those purchasing their first homes.
“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”
Home prices will stay high, but price growth will continue slowing
Home prices aren’t expected to keep zooming up into the stratosphere in 2022 the way they did this year. So buyers can breathe at least a shallow sigh of relief. Instead, Realtor.com economists anticipate they’ll increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021.
This means the double-digit price growth that confounded buyers earlier this year is expected to taper off.
However, prices aren’t anticipated to come down from the highs they reached this year due to the continuing shortage of properties for sale and hordes of buyers continuing to enter the market. They just won’t go up so much as quickly.
While that’s not great news for buyers, homes aren’t expected to cost much more than they did just a few months ago.
Not many more homes are expected to go up for sale
Unfortunately, for frustrated buyers who have had trouble finding the right homes in the right locations at the right price, there isn’t expected to be a rush of homes hitting the market.
Realtor.com economists predict the number of homes for sale, which is hovering around record lows, will tick up only 0.3%. That’s partly due to builders having a tough time ramping up construction as they contend with shortages in workers and materials, compounded by the global supply chain backups. (Single-family housing starts, which is when builders start construction, is expected to rise only 5% next year.)
There are plenty of investors snapping up single-family homes and turning them into rentals. And there is no tidal wave of foreclosures expected to hit now that the government moratoriums are expiring.
There are also more homebuyers today than there are abodes for sale.
Sales will also continue to climb, hitting a 16-year high as they go up by 6.6%, Realtor.com economists anticipate. That’s partly because technology has sped up the homebuying process. Plus, buyers are jumping on whatever comes up for sale in record time before the property is snapped up by another eager buyer.
Attractively priced homes in good shape are expected to continue going under contract quickly.
That speed supports increased housing turnover as more abodes change hands as folks move into their first homes or relocate, trade up into larger residences, and downsize.
The popularity of the suburbs is also likely to endure. They emerged as the places to be during the pandemic as buyers could score more square footage and bigger yards for less money than in the bigger cities.
It won’t be easy for first-time homebuyers
First-time buyers are likely to continue struggling to compete with the offers over the asking price and win the bidding wars.
The ace in their pocket is the work-from-home phenomenon that has allowed many white-collar professionals to work from anywhere they have a strong Wi-Fi connection.
Mortgage rates will continue ticking up
Mortgage rates have been the wild card to the housing market during the pandemic. Low rates at the start of COVID-19 helped fuel dizzying price jumps as buyers could afford to spend more on homes. That’s because they were paying less interest each month so they could absorb the higher home prices.Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022. That’s up from a low of 2.65% in the first week of January for 30-year fixed-rate loans, according to Freddie Mac data.
It’s also likely to result in homebuying becoming even more expensive. With home prices continuing to tick up a little and rates increasing, those purchasing a home with a mortgage will wind up shelling out more each month.
The culprit behind the price hikes: There simply aren’t enough homes to go around—for sale.
Read the full article on:Realtor.com