It’s that time of year when economists analyze trends and make specific predictions about the next year’s housing market. Here are five stand-out predictions that will resonate with many people in the country who are considering a move in 2022.
1. New Listings Will Reach a 10-Year High, But…
New listings are predicted to surpass the 2018 number of 7.6 million homes, setting a record that goes back to 2012. But the increase in homes for sale will hardly put a dent in the supply shortage. That means that buyers will still be facing competition for available homes. The good news, however, is that the market should start to balance out more as sellers want to cash in on record high home prices. Also, home owners who have been in forbearance during the pandemic will want to sell their homes as missed mortgage payments become due.
2. Home Values Will Grow at a Slower Rate and Higher Mortgage Rates Will Soften Demand
Home values are expected to rise around 5% a year rather than in the double digits we’ve recently experienced. Mortgage rates are expected to reach pre-pandemic levels at around 3.5% for a 30-year term. That makes borrowing to buy a home more expensive and deters those on the cusp of affordability. Besides an increase in rates, some will look at how expensive homes have become and decide to stay put.
3. The Condo Market Will Be Back in Action
Condos sold at a whopping 17.3% discount compared to single family homes during the pandemic. With the economy flowing again, many who turned their noses at condos last year will reconsider because they want reasonably priced homes with amenities. Economists predict that condo popularity will increase and the current discount will shrink. Unlike the single family market, Realtors report that they can negotiate on price with condos as well as include contingencies, such as flexible closing dates, from more typical times.
4. The DOJ May Change How Real Estate Agents Are Paid
The Department of Justice continues its anti-trust investigation of the National Association of Realtors. It’s possible that home buyers in the future will need to pay their own Realtor upfront for service rather than the customary practice of buyer and seller agents receiving commission from the seller’s proceeds at closing. If buyers need to pay upfront, they will become more selective in choosing Realtors with the best service. Or, we’ll see buyers working with agents who have exclusive access to home listings and dual agency (one agent represents both buyer and seller) will become more prevalent.
5. Rent Will Rise as Much as 7%
Rent is predicted to increase by 7% by the end of 2022. That’s more than double the prediction of the year-over-year 3% home price increase. Demand for renting is going up due to several factors: The end of mortgage forbearance will send many owners to sell and rent instead; many people are moving to cities where it is more common to rent; and as a strong labor market enables people to move to new cities, they will prefer renting first to get to know the city before buying.
Real Estate Term of the Week
Forbearance: When your mortgage servicer (the company that sends your mortgage statement and manages your loan) or lender allows you to pause or reduce your payments for a limited period of time.