What will the housing market look like in 2022?
No one knows for sure, but people have made some real estate predictions.
The US Census Bureau predicts that by 2025 there will be a shortage of 4.7 million homes. This means that demand is going to continue to rise and outpace the supply of homes. This has been going on for over 30 years and shows no signs of changing soon.
The average home sale price in the United States has increased to a new record high, and is projected to continue rising in 2022. The number of people moving into the United States is also expected to increase from 29 million to 60 million by 2022, which will contribute to this increase.
In 2020, there were predictions that the American economy would slow down for a few years. Instead, much of the economy has come back strong. In the same way, the real estate predictions for 2022’s housing market might not be what actually happens. However, we can still take a look at some of the most likely outcomes based on current trends.
Here are the 5 most relevant real estate predictions for 2022:
1. Possible Slowdown In Home-Price Growth
For the past few years, we have seen steady price growth in the housing market. However, a slowdown could be in the works. Redfin, the real estate broker, recently predicted real estate prices may rise by just 3% in 2022, compared to 16% in 2021. This would be the second slowest increase since the end of the real estate crash in 2012. It might reduce the number of real estate investors from entering the market and give first-time homebuyers a chance to snag a home.
However, others are still looking for strong home price growth in 2022 – Fannie Mae has called for home prices to grow 7.8%, and Zillow thinks they may rise 13.6% by September 2022.
What most everyone agrees on, though, is that home prices will continue to increase in most areas. This means prospective homebuyers should consider acting sooner rather than later.
2. More Inventory Overall, But Few Starter Homes
Real estate predictions for 2022 in the United States suggest that there will be a rise in inventory levels, but the growth will be predominantly in the luxury and premium housing markets. This means that although homebuyers will have more choices, those looking for starter homes will still face a shortage.
Inventory levels have been steadily increasing in the past few years. In fact, from 2016 to 2017, inventory rose by a staggering 13% – higher than it has been since before the Great Recession of 2008-2009. This increase is mainly due to more luxury homes being built and sold.
However, there are still concerns about low supply for the first-time buyer. Most agree that there will be a shortage of starter homes for the foreseeable future, so those looking to buy their first home should consider doing so soon before prices rise even more.
3. Continued Migration Toward Affordable Housing Markets
The current housing predictions for 2022 in the United States show that there will be continued migration toward affordable housing markets such as Atlanta, Indianapolis, and Phoenix. This is because these cities’ low living costs mean that they are among the most affordable to live in.
This trend may continue if prices in expensive housing markets like New York and San Francisco continue to rise. For example, both states experienced a 13% increase in home prices in 2017 – but California had a 19% increase and New York had a 15% increase. These high numbers may make it difficult for people to afford homes in those cities should there be any future price increases. The Northeast and West Coast of the United States are expected to experience the highest price increases, as well as states with a high cost of living such as California, New York, and Massachusetts.
4. Millennials Will Become Even More Important
Millennials will continue to be a driving force in the market, making up 37% of first-time home buyers. They have been the key demographic in the housing market for a few years now, and this is not expected to change in 2022. In fact, they are predicted to become even more important as they move into their mid-30s and enter new life stages.
This means that businesses targeting millennials – such as real estate firms – should continue to focus on innovative ways to reach this demographic. For example, more real estate firms are using video to show potential buyers their homes and provide a virtual tour.
However, it is important to keep in mind that millennials may not be as interested in luxury housing markets compared to older generations – they also have less money overall due to student loan debt and other factors. This means that the luxury housing market might not continue to rise at the same rate it has in recent years.
5. Higher Mortgage Rates Ahead
One potential change affecting the housing market in 2022 is that mortgage interest rates may rise. The average 30-year home mortgage rate recently topped 3%, and the Mortgage Bankers Association recently predicted it would go over 4% by the end of 2022.
Interest rates are currently very low. As they are expected to rise slowly in 2022, this will cause an increase in mortgage payments, making it more difficult for some people to afford homes.
Higher mortgage rates would make homes more expensive to own, which could consequently slow down their price increases or even cause prices to fall.
Here are two reasons why this might happen:
- Every time interest rates have gone up in recent years, home prices have decreased. This is because buyers with increased monthly payments are less likely to be able to buy a house.
- When you buy a house at a higher price level, you will pay more in mortgage payments each month. This means you have less left over for other expenses. So if mortgage rates do go up, it could result in lower incomes for luxury home sellers.
Of course, mortgage rate predictions have been wrong before. But it is important to be aware of this potential change in order to best plan for the future.
These are five of the most important housing market predictions for 2022 in the United States. Keep in mind that they may change due to unforeseen events. For example, increased inventory might keep prices from rising as much as expected, or a recession could occur. If you’re thinking of buying a home in 2022, it’s best to be prepared for any possibility.
We hope you found this blog post on 5 Predictions For the Real Estate Market in 2022 useful. Be sure to check out our post on Top 5 Best Cities in the United States for Real Estate Investing for more great tips!
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