At the beginning of every New Year, most people make resolutions that involve some form of change. Whether that be professionally or personally, it’s a chance to give ourselves a goal to start anew.
For anyone who has had their sights set on jumping into the real estate market then you know how crazy it’s been these past two years as the pandemic turned the home buying process completely upside down. It may be a New Year but is it a new market?
With mortgage rates hitting a historic low, coupled with an inventory shortage, the red-hot real estate market saw homes selling within hours of being listed, bidding wars ensuing, and sale prices closing over asking price.
When it comes to the real estate market, we know anything is possible, but housing experts predict that in this New Year, buyers will likely see similar trends to the last two years which included elevated prices, low-inventory, and fast turnaround.
Another contributing factor fueling home buyers were the extremely low interest rates which hovered near historic lows for an extended period of time, a result of the Federal Reserve buying mortgage backed securities to support the economy. But in 2022, the Fed plans to lessen those purchases to curb rising inflation. As a result, mortgage rates are expected to rise.
How much they will increase is not entirely clear, but economic predictions estimate the Fed may raise interest rates three times in 2022. This potential change will have an effect on the home buying process although the new policy isn’t likely to “hurt” buyers in the next few months. Regardless, it’s safe to say anyone looking to purchase are encouraged to act sooner rather than later.
While the buyers are out there, it’s the sellers who are slowing down a tad bit. When the pandemic started, the demand increased and pushed the home prices to an all-time high. And although we have rounded the corner when it comes to the pandemic, the 2022 housing market will likely continue to be costly, with home prices and rents remaining on the higher end of the spectrum.
Along with the demand for homes comes an increase in demand for rentals, especially as we head into the first quarter of 2022. The previous discounts that landlords had been giving out during the height of COVID are practically gone. As these concessions disappear, many renters are finding it difficult to afford their current apartments and will have to move.
As a result, there will be an increase in availability with inventory opening up. The demand for rentals in the neighborhoods chock-full of amenities will also be greater. The areas most desirable are the ones with shopping, restaurants, and nightlife, especially as these sectors have re-opened their doors and welcomed back their customers. For many people, these amenities are an important factor when it comes to deciding where to live. Being close to all of these things, as well as transportation, is a luxury many potential renters, and even buyers, seek out. Areas such as Dumbo, Fort Greene, Bushwick, Gowanus, and Red Hook, will be some of the more attractive places to live for these reasons.
Finding a place to call home, whether buying or renting, is never as easy as we hope it will be. The real estate market will always go through highs and lows, and this upcoming year is no exception. Keeping that in mind, here are a few things to consider for anyone planning to make a move in 2022.
Prices will remain high
According to economists at Realtor.com and Zillow, the competition isn’t likely to die down this year. Economic trends such as low inventory, elevated demand, and low mortgage rates will continue to give sellers leverage in the market.
Buyers will continue to see potential bidding wars, particularly when the market picks up in the spring and summer months. Although it’s hard to predict exactly what’s going to happen, Zillow predicts home values will rise by 11% in 2022. While not as high as in 2021, it’s still a substantial increase.
Increase in interest rates
With the likelihood of interest rates rising multiple times this coming year means mortgage rates are likely to increase as well. Home experts predict a 30-year fixed mortgage rate will reach 3.60% by the end of 2022 compared to the average of 3.30% as of now. The upside to an increase in mortgage rates is that buyers scooping up property for investment purposes may lessen, giving the people who buy homes to live in more of an advantage.
Inventory will remain low
The number of homes actively for sale fell to a record low at the end of last year, and the etnrance of new listings has been slow moving into 2022. Spring has generally been the time when the market picks up and while there are likely to be more listings come spring and into summer, there may not be enough to meet the demand. It will continue to be a strong sellers market.
Home buyers, be prepared
With the way the market is trending, it’s important for buyers to be on their A-game. That means doing research ahead of time, having the proper documents readily on hand, and being ready to act quickly. That includes making an offer almost immediately. For some buyers, purchasing out- of-state has them relying on photos and showings being done via computer and over zoom.
From the realtor side, agents not only have their eye out for new listings, but listings that are “coming soon” to the market. Knowing what a client wants and how much they’re willing to spend allows agents to hone in on the right properties. There’s no sense in taking potential buyers to properties that don’t meet their needs or are out of their price range when the market is this competitive.
And while the 2022 real-estate market may not reach the incredible heights it did in 2021, don’t expect it to slow down anytime soon. In the meantime, do what you need to be prepared for when the right home comes along and work closely with your real estate agent who can guide you through the entire process.
