Happy New Year and welcome to 2022! We’re here looking forward to all this year holds and are praying for you as you set your sights upon this brand new year. We know the last couple of years have been a wild ride and it’s no surprise that we continue to get questions about what 2022 has in store for the real estate market. This will be a compilation of our thoughts, as well as those from seasoned economists, brokers and real estate experts. We’re going to talk about what last year ended up looking like, where we are at this exact moment in time, and then where we think we’re headed. This is jam packed with information, so buckle up!

2021 was a record year for real estate and we are certain that you’ve heard all of the news about the absolute frenzy that we experienced and lived day in and day out!

U.S. 2021 Real Estate Market Stats

• In 2020 5.3 million homes were sold and 2021 6 million were sold, which is a 7% increase in the volume of homes sold. 

• First time home buyers were 34% of all home buyers. That was up from 31% in 2020 where we saw a huge surge of millennials enter the market. 

• The millennial generation continues to enter the housing market with actually quite a bit of savings and cash heavy buyers ready to buy. 

• 29% of 2021 home sales were purchased above asking price. This was certainly the year of the bidding war. 

• The market was super competitive, 80% to 90% of homes went under contract in under 30 days. 

• Buyers typically searched for 8 weeks and looked at a median of 8 homes. 

• 15% buyers purchase new construction homes. New builds haven’t really caught up since the Great Recession.

• 11% of homes purchased were multigenerational.

Real Estate Market Trends

• People are continuing to want more home and space so they are heading to the suburbs and exurbs. We saw a lot of this in 2021 and expect it to increase in popularity. 

• People are looking for multigenerational homes where there is a separate living space, bedroom, and kitchenette of some kind within the home. Or they are looking for homes that have a back house or room to build a back house.

• This winter is looking like it’s going to be the second best for the real estate market in 15 years. The intensity of the multiple offers has lessened and days on market are a little bit longer this season.

• There are a ton of cash buyers. This is due to a lot of first-time homebuyers entering the market, but a ton of relocation buyers coming from places where they sold property and have a ton of cash.

Things to Know Going Into the 2022 Real Estate Market

Inflation

Inflation is definitely here and growing, and you may have heard that term in the news as people talk about it. What does that mean for actual home buying? It means that for lenders, they’re making 15 more, typically 30 year mortgages where you’re going to pay the exact same amount every month for the next 30 years. They’re making a loan today that you are going to pay the exact same amount in December of 2052, you know? They have to raise rates currently because of that inflation, so it is affecting people’s ability to qualify. If the lender doesn’t feel like they’re going to make money over that time period they need to make sure that they raise the rates now, which affects your purchasing power. 

On the flip side, as the buyer, there is no better way to hedge against inflation than to be purchasing real property. You lock in that mortgage rate and it will not change ever. Don’t wait and buy in five years. Do it now and then you will own that property and you’re hedging against the inflation that the whole economy is experiencing.

High-end homes are still flying off the market, because people are using them as that hedge. Instead of investing cash in the market, they would rather incest in real property, maybe even a second or third home or land just to make sure that it is secure; because it’s not going to be volatile like the market.

The Fed and Mortgage Rates

This can sound so intimidating, so we are going to do our best to make this as approachable as possible! If you’re not familiar, the Fed is definitely a buzzword. It’s the Federal Reserve Bank in the United States. People talk about them raising rates and what you need to know is that this governing body does not directly change mortgage rates. The reason things change as a result of the Fed’s activities is because they’re so closely followed. It’s an indicator of what our economy is going to look like and what intervention they’re going to have in our economy in the short term.

They really flooded our system with cash here in the last few years, especially in response to the pandemic, and the Fed chairman was actually up for renomination, so he was reconfirmed. Powell has said he intends to fast track the tapering, so basically to start selling off a lot of what they bought. This was initially set to happen this quarter, so Q1 of 2022 and actually started happening Q4 of 2021. I think they’re seeing inflation rapidly gain momentum in a way that they didn’t anticipate and it’s time to take action. This is basically how I would describe the Fed’s mandates and their goals as a body are to fight inflation.

If you are really sensitive when it comes to mortgage rates, it is time to buy; whether that’s this winter, spring, or early summer. We don’t know exactly when the Fed will raise rates, but almost everybody that’s watching these agrees that it’s going to happen by November. Ok, so probably at earliest it’s going to happen is September or November at the latest. 

Our 2022 Market Predictions

1. The market will remain hot with less home sales. Always when you have a higher interest rate, it’s going to take down the amount of people that are going to buy. That’s just how it is because of that purchasing power that we talked about earlier, the portion of your mortgage that is now interest instead of the actual price of the property. We would predict there’s going to be about a 2% reduction in the amount of home sales. 

2. People will continue relocation in the U.S.. Relocation is happening and we’re predicted to still be one of the hottest in the U.S., but I think these are good trends to observe overall. And then we can help you on a micro level with where you’re exactly moving to.

3. Home prices will increase in 2022. We would say that we should expect maybe a 7% to 10% increase. 

4. More people are moving to the suburbs and exurbs. It’s just really driven by people now having the ability and opportunity to work remotely, and they want to trade up for some extra space and maybe some higher rated schools.

5. Inventory will go from red hot to hot. We’ll definitely see more inventory come to market for those people that had a forbearance program and other assistive programs winding down.

6. New construction is steadily moving higher. There will be more homes in 2022 than there was a year ago. 

7. We expect winter right now and summer to be the busiest market. Get out there and find yourself a house — this is the time to do it!

We Will Help You Navigate the 2022 Real Estate Market!

We are really curious and interested to see and experience something different than we have in the past year! Hopefully all of this information is more so enlightening and interesting than intimidating. It can feel like a lot, don’t fret though, we are here to help you navigate it all and get you into your dream home this year!

Until next time,

Brianna & Keelie