2022 Real Estate Market Prediction
In 2021, we experienced RECORD high Sales Prices, extremely Low Days on Market, Multiple Offers, Appraisal Contingencies being removed within the offer or the differences between the appraisal and purchase price being paid for by the buyer, and LOW Interest Rates. Needless to say it was truly a sellers’ market throughout the year.
Most of the country witnessed DOUBLE DIGET equity in 2021. Meaning if you purchased a home in January of 2021, by the end of the year you had double digit percentage equity. This not true in all markets, but on average homeowners witnessed between 10% - 14% equity within one year.
What Caused this type of market? Well, the market according to the average absorption rates all point to the imbalance of available homes or SUPPLY and DEMAND. When you combine low supply and low interest rates, you get a Sellers’ Market and all that comes along with it. Multiple offers, bidding wars, paying above appraised value, etc.
There are additional factors that effected the market in 2021 beyond the low interest rates and Supply and Demand, which include Rental Rates increasing and New Construction slowing down. With rental rates increasing we found renters stepping away from renting and purchasing homes, and Builders simply could not build homes fast enough. With the new construction slowing, Resale homes were able to take advantage of the supply and demand imbalance.
2021 was a wild market but what do we expect the market to do in 2022?
Let’s discuss a few factors and get more familiar with what’s happening right now today.
The supply and demand imbalance is still here. This has not changed and that’s due to the continued Low Interest Rates and the demand for housing.
We can also add the fact that Rental Rates are increasing and there is an expected 7% up to double digit rent increase averages throughout the country for 2022.
Builders and New Construction are trying to provide relief for the supply and demand imbalance, but the challenge is building supplies, labor, and issuing certificates of occupancy. Some people don’t understand that there are a limited number of Inspectors working in each city and county, and unfortunately the inspectors are inundated with inspection request and they simply can not keep up with the demand. In some cases builders are 8 months to 12 months from start to finish when building a home.
With new construction taking so long, some homeowners are choosing to not sell their property until they are closer to getting keys to their new home, or they are forced to rent on an interim bases. As you can see, waiting on new construction to be completed is pushing house prices up for resale, and allowing the inflation and increased rental rates.
We are expecting interest rates to increase this year. When will that happen, we honestly do not know, but all indicators point towards the end of the second quarter of 2022. As the Feds increase interest rates, banks and lenders will have to increase interest rates to the general public, which will cause some homebuyers out of the buying field but not enough to make a major difference.
I would predict housing to look the same in 2022 when it comes to the Supply and Demand imbalance. I would also think equity and pricing to not increase as much in 2022 as in 2021, but don’t be surprised if housing still experiences close to double digit equity and price increases.
If you’re a seller it’s a great time to see because of the Supply and Demand imbalance, and the low interest rates. If you’re a buyer it’s a great time to buy before the interest rates increase. I don’t feel an increase in interest rates will make up for the supply and demand issue we are experiencing.
Bottomline is we will see a shift in the market, but I don’t expect a major change.
If you have any questions or comments, please feel free to reach out to me!
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