Last year was one of the most challenging in history for house hunters. A shortage of inventory due to astronomical demand and lack of homebuilding fueled bidding wars and drove listing prices up. Somewhat offsetting the higher prices was that millions of Americans were able to capitalize on historically low interest rates and afford homeownership. This year is starting off to be more of the same, but experts predict that 2022 will get us closer to a sense of normalcy in the market.
Interest rates are predicted to rise, easing demand and competition so that supply can bounce back. The popularity of multigenerational homes, households with family members from different generations living under one roof, added into the mix of 1.6 million housing units that were started in 2021 – a 15.6% construction increase over 2020, according to Bloomberg.
As always, supply and demand will ultimately determine how the year plays out. Recently nearly half of homebuyers surveyed by Redfin, a Seattle-based real estate brokerage, say they will feel more pressure to buy if rates pass 3.5%. With Realtor.com predicting the 30-year-fixed mortgage rate to reach 3.6% by the end of the year, there is potential for a near-term buying boost before demand likely decreases.
It’s still very much a seller’s market, but that coin has two sides. Sellers might be able to sell quickly and over asking, but when they enter the market as buyers, they experience the troubles of finding a new house at a decent price. Those who are significantly benefitting are downsizers who sell and move into lower-priced homes or move greater distances into comparatively less expensive markets.
We’re starting to see that there is a ceiling on what buyers will tolerate in price and condition. Although it may not seem like it, bidding wars have slowed – down from 74.6% in April to 59.5% in November. Listings that are priced reasonably and in good shape will continue to sell but selling a home without necessary updates will deter buyers who have grown weary of the hunt.
Buyers should expect similar trends to what we have seen over the past two years: high prices, low inventory, and a quick turnaround. Do your research and be ready to make a quick move when the right listing comes along. That will be determined by your budget, which you should stick to regardless of market inflation.
Sellers should consider the latest buyer characteristics. According to NAR, first-time buyers made up 34% of all homebuyers, and their median age was 33. The typical repeat-buyer age rose to an all-time high of 56 years old. Most buyers wanted to avoid renovations and problems with plumbing and electricity, while moving nearer to family and friends.
Being prepared is the key to success in both situations. With a REALTOR® by your side, you can trust that you’ll be expertly guided through the complicated process of buying and selling a home in 2022.