Local Housing Market Predictions
While 2021 had its fair share of ups and downs, we know one thing to be true: the real estate market for homes priced between $200,000 and $350,000 was crazy! With that in mind, there’s one big blaring question right now: will the 2022 housing market continue to be a seller's market in most price ranges, or will we see a more balanced market?
Here’s my predictions for what will happen with the local real estate for the rest of 2021:
Interest rates are rising but project they'll stay low. One of the biggest drivers for 2021’s booming real estate market was record-low mortgage rates. Because of this, affordability reached one of the highest levels it has in the last 30 years. Naturally, eager buyers followed. The good news is experts are predicting that mortgage rates will remain low for the near future. While home prices continue to appreciate, the counter of low mortgage rates means homes are still affordable to purchase, albeit slightly less than they were at the beginning of the year.
Home sales are slowing. The last two years have been a couple of the craziest years in the history of real estate. What we're seeing now is the typical slowdown prior to the holidays.
Home prices are appreciating at a slower rate too. The battle between high buyer demand and low inventory for most of 2021 led to a surge in home values that left everyone scared we were headed for a housing bubble. There’s no hiding the fact that this year’s home price escalation was a bit excessive. However, it was the result of simple economics – high buyer demand coupled with extremely low supply. As inventory starts to grow, I anticipate home appreciation will continue to rise, just not at the same pace we’ve seen over the last year. I do not expect home prices to drop.
Some foreclosures may happen but won’t lead to price declines. The wave of 2020 unemployment that came along due to the pandemic led some homeowners to enter mortgage forbearance. Because of this, foreclosures may rise. However, unemployment in our area is now near pre-COVID levels and built-up equity puts homeowners in a position to sell instead of default.
What does all this mean for buyers and sellers for the rest of 2021?
Despite the approaching holidays, there's still a lot of motivation for buyers and sellers in our market. With both inventory and mortgage rates remaining low, buyers and sellers stand to benefit from making a move before the end of the year. Waiting until next year could mean losing out on a less competitive market and better affordability: the two big factors that positively impact buyers and sellers today.
Here's what I anticipate for our 2022 housing market:
Home Prices. In the past 12 months, home price appreciation has been the topic of many headlines. Speculation that we’re in a housing bubble has made some buyers and sellers hesitant. It’s important to remember that the 2021 market was anything but normal, and that escalating home values were a direct result of record-low inventory. The inventory situation should improve in the coming year, stabilizing price appreciation. But I don't expect prices to depreciate.
Mortgage Rates. This past year saw the lowest mortgage rates in the history of real estate. So, if you're waiting for those rates to go down more, you may be waiting a long time. What’s important is to remember that while homes right now may be less affordable than they were a year ago, they’re still extremely affordable. If we look at the 30-year mortgage rate chronicled by Freddie Mac, we can see the average rates by decade:
While experts don’t project mortgage rates will rise a huge amount, any increase would mean an increase in monthly mortgage payments. A couple decimal points may not seem like a lot to most people, but it could make or break someone’s budget. A rise in mortgage rates, coupled with continued home price appreciation, means one thing: paying more for the same house next year than what it can be bought for now.
Housing Inventory. Inventory has been, without a doubt, the biggest player in this anything-but-ordinary real estate market we’ve experienced in the last two years. The good news? There are many factors that make me anticipate a rise in homes for sale. Here’s why I say that:
Homeowners may be more confident putting their homes on the market as more people become vaccinated and COVID numbers drop.
Many of the obstacles slowing new construction are starting to fade and those homes are coming on the market, adding new inventory and meeting the needs of home buyers.
While more inventory may take a bit of the edge off today’s competitive market, it doesn’t mean prices will fall or homes will become more affordable. There will just be more available to choose from.
If we’ve learned anything in the past couple of years, it’s that while we can project the future, we can't predict it. I stay on top of the latest insights to make sure my clients have the most up-to-date information. Using my real-world insight and advice will leave you confident in your decision to sell and buy.