The housing market is crazy. Will it get worse before it gets better, or is it finally time for home prices to drop?
The housing crisis we had a decade ago is a complete 180 from what we’re seeing now. Low housing inventory coupled with high demand from buyers has led to one of the hottest seller’s markets in existence. In 2022, the market shows no signs of cooling.
Now for some good news for buyers: home prices are expected to continue climbing this year, but at a slower pace compared to 2021.
Here’s what you need to know to buy your home in 2022.
Home Prices are Still Soaring
Research shows that U.S. home prices increased by a staggering 18.8% last year alone. The good news is that this level of price increase is simply not sustainable. Though prices are still expected to increase, the growth won’t be anything like what we saw in 2021. Some experts predict we’ll see price hikes decrease by about half, putting us back into single-digit increases.
There’s been a rush of home buying over the last two years, and there’s not likely to be a noticeable drop in the near future. However, experts do feel that home price fluctuations may largely stick to a local level rather than having a pervasive hot market throughout the country. We’re seeing this a lot in smaller towns and suburbs, as people who have shifted to permanently working from home are leaving expensive cities in favor of more affordable places.
Experts Predict a Seller’s Market for 2022
A seller’s market happens when there are more buyers than inventory. It’s basic supply and demand: when supply decreases, the price goes up. High demand can make the supply shrink even faster.
Experts don’t see any signs of this changing, at least not anytime soon. Within the next 12 to 24 months, the housing market is expected to stay fairly robust. The same trends that got us here (historically low interest rates, low supply, high demand, etc.) are likely to continue in the near future. Even with sky-high prices, homes still often sold above the asking price and moved off the market quickly.
Top real estate experts predicted a strong seller’s market throughout the spring this year, but they’re expecting the competition to wane quite a bit. Last year, the supply was fiercely out of balance with the demand. Levels this year will return to near-normal.
What Else to Know About the Current Housing Market
With slightly relaxed demand, buyers may enjoy a little more time to make decisions and do their due diligence — a feat that simply hasn’t been possible over the last year. However, they will still have to be ready to act fairly quickly as demand for homes is still high. Preparing ahead of time by knowing what you need and want in a home, knowing what you can afford, and recognizing a good opportunity when you see it can significantly shorten your timeline.
Some more good news: the buyer bidding wars that dominated last year are likely to fizzle. Sellers may still have to choose between multiple offers on a home, but some experts say sellers may not have to be as selective about their offers. Buyers may not need to wave around a cash offer or a conventional loan to come out ahead.
Rising mortgage rates might also deter some buyers, making it easier for other home-seekers to find their perfect home. So far, interest rates have risen about 1.5% compared to this time one year ago. The higher interest can eat into your buying power, which might affect the amount of home you can afford. If you’re in the home-buying game, you need to watch those interest rates carefully, as increases might force you to rethink your budget.
Prepare for Your First Home with a Free Home Buying Challenge
Buying your first home is a lot to take in. Feeling rushed in a hot seller’s market certainly doesn’t help your stress levels, nor does it help you focus on your most important priorities.
My free Home Buying Challenge is designed to help you gain confidence in the process. Preparation is the key to first-time homeownership. It’s about knowing the questions to ask, figuring out what you don’t know (and what you don’t know you don’t know), and ensuring you’re ready to pull the trigger when the right opportunity comes.
This is the single most important step before you buy a home, which is why I’m offering this course for free. Get in on the Home Buying Challenge and start making your way to Claim Your Keys!