If you’re one of many would-be homebuyers who got shut out of the real estate market last year, you might be hoping for better luck in 2022.
The good news is that you probably won’t see the jaw dropping jumps in home prices seen last year. But prices are still expected to go higher and mortgage rate hikes are anticipated, too.
The housing market had the strongest showing in 15 years in 2021, sending home prices through the roof. Prices skyrocketed nearly 20% through the third quarter compared to a year before, according to the Federal Housing Finance Agency.
The frenzied competition and astronomical price tags gave many buyers pause.
Heading into this year, just 26% of consumers thought it was a good time to buy a home, according to Fannie Mae’s Home Purchase Sentiment Index for December. That was a sharp decrease in sentiment from one year earlier, when 52% believed it was a good time to buy.
One big reason prices have skyrocketed is that there are so few homes on the market. Housing inventory hit an all-time low in December. And, as long as there are way more buyers than sellers, competition will remain fierce and prices will go up.
“Even though demand remains strong, a majority of consumers clearly have reservations about purchasing a home at current prices, but that hasn’t stopped people from house hunting. Here’s what to expect if you’re one of them.
Home prices will go up, just not as fast as last year
Home prices are widely expected to continue to rise this year, but not at the eye-popping pace of 2021.”That kind of price increase was a shock. ‘Unprecedented’ is not strong enough. It was nuts.” The median price of a home was $346,900 in 2021, up 16.9% from 2020, and the highest on record, according to the National Association of Realtors.
A panel of economists convened by the NAR forecast median home prices will increase by 5.7% in 2022. But exactly what happens next will depend largely on how both buyers and sellers react to the changing market.
“If buyers finally balk at unaffordable prices, sales volumes could fall, but if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of price appreciation.”
Mortgage rates will rise
Already in the first few weeks of the year, the average 30-year fixed rate for a mortgage has jumped significantly, rising to the highest rate it’s been since the beginning of the pandemic in March 2020. That trend toward higher rates is expected to continue, although not necessarily at the pace seen in the past couple of weeks. The 30-year fixed-rate mortgage average 3.56% In February 2022. The average was 2.77% this time last year.
Inventory will grow, but so will the number of buyers
While the availability of homes for sale often ebbs and flows, last year seemed to be all ebb. “The last 18 months have been out of control — every time you turn around it’s been record-high prices or record-low inventory. We have lost the cyclicality of the market. “But this year, the housing market is expected to return to its normal seasonal cycle, with more homes coming on to the market in the spring, then tapering off throughout the summer. At the end of 2021, inventory was at the lowest levels ever, with just 910,000 homes available to buy nationwide, according to the National Association of Realtors.
Homes will continue to sell fast
If you’re looking to buy, you will have to act fast. Many homes have been going into contract in a matter of days of being listed. In a market this competitive, you will need to have a pre-approval and be ready to make decisions right away.
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