At the end of each year, we review the details that made the current real estate market and then look ahead to predict what’s in store for the upcoming year. Below are our predictions for 2022 based on data that was available as of December 15, 2021.
The big news for the real estate industry in 2021 was that while we were all dealing with COVID and the Delta variant, the housing market soared and buyers flocked to write offers. Investors sold high and bought low in more-rural locations. The real estate market hardly slowed down even during traditionally slower months. All in all, the market was red hot as expected in many markets and unexpected in other markets that are not usually traditionally as busy.
The year ahead is sure to bring more excitement and hope for a year less focused on Covid and restrictions. The year is sure to bring stabilization in many employment sectors and a return to a more normalized life. With that, here is what we may expect in 2022:
- Housing Inventory – The housing industry saw a record-setting inventory crisis in 2021. Inventory will continue to be a major struggle in many markets in 2022. With inventory so tight, many homeowners who want to sell but are concerned about finding a home to buy may decide to stay put in 2022. Overall, inventory will remain limited due to the change in the work from home environment which is putting further demand on housing needs for a work from home employee.
- Affordable Housing – First-time home buyers were not able to buy in many markets due to rapidly rising home prices and a competitive buyer pool. In 2022, they will continue to struggle to get into the housing market. This will force many first-time homebuyers to opt for employment that allows them to work from home and move to a more affordable market. This problem will not be alleviated until we are able to bring more inventory into the market.
- Housing Starts/New Construction – The United States’ new construction shortage began in 2009 and by 2021, our country had accumulated a deficit of 5.2 million housing units. The U.S. needs 1.62 million units per year to keep up with demand for new construction (not including alleviating the prior year’s deficits), the increase in population, and replacement of old structures. In 2021 the home building industry was not able to keep up with the demand and was further damaged by increasing lumber prices, supply chain shortages and a lack of qualified tradespeople. All of this resulted in a surge in new home sales prices. Housing starts in 2022 will continue to not be able to meet the buyer demand. However, delayed projects due to lack of laborers, trades people and materials will begin to progress and come to the market. New construction will also see a dramatic change in product style and product size. Buyers are demanding a more modern architectural style and more space for working from home opportunities. Builders who did not stop production in 2021 will be aggressive in bringing product to the market as demand continues to ramp up for new homes.
- Home Price Growth – 2021 saw historic home price growth and this price growth will continue in 2022. In fact, 2022 is gearing up to set a record for a decade-long streak for price growth of year-over-year price increases. Due to buyer demand and a severe lack of inventory, we expect the national median sales price in 2022 will continue to increase 2.9% – 3.8% which is slightly lower than 2021. The only reason we will not see a higher number is because of the pressure which will be put on affordability. Regionally the Pacific Northwest can expect to see home prices increase 7.3% to 8.5%. This will be lower than the double digit 14%-18% in 2021 but this is still a very healthy number.
- Interest Rates – Since March 2020, interest rates have hovered near 3% for a 30-year fixed rate mortgage and they often went even below that. In December 2020 rates hit a historic low level of 2.68% which allowed more buyers into the market. This high demand and strong competition were a double-edged sword as it drove home prices upward. In 2022 we expect interest rates to climb slowly since inflation is on the rise. Mortgage rates will rise in 2022 and should increase to the high 3’s by year end.
The 2022 real estate market will bring both challenges and opportunities but one thing is for sure and that is that the real estate market is sure to see another year that will set many records. For additional information and predictions on our local market, please call or text: (206) 979-9632 or send an email to David@TheHarlanTeam.com