The US housing market was fierce in 2021, with an insane demand for houses and an alarmingly low housing inventory. This imbalance led to a steep increase in home prices.
According to CoreLogic, property prices increased from 6% in 2020 to 15% in 2021. Price escalation began during the first quarter at 10% and continuously scaled up, reaching 18.5% in December.
For this year, the CoreLogic Market Risk Indicators hint at a continuing increase in prices during the first part of 2022. However, it will steadily decline, ending with a low 3.5% increase by December. The anticipated decline will reduce the annual average to 9.6%.
What To Expect From Home Prices in 2022
How will these forecasts play out in 2022?
The first few months of 2022 are expected to duplicate the 2021 scenario, meaning property prices will continue to rise. Dr. Frank Nothaft, CoreLogic’s chief economist, has this to say: “Much of what we’ve seen in the run-up of home prices over the last year has been the result of a perfect storm of supply and demand pressures. As we move further into 2022, economic factors – such as new home building and a rise in mortgage rates – are in motion to help relieve some of this pressure and steadily temper the rapid home price acceleration seen in 2021.”
Aside from the high demand for properties, two factors will keep the prices high. These are the low mortgage rates and low inventory.
Low Mortgage Rates = High Home Prices
Last year ended with historically low mortgage rates. Even if the rates have already started increasing, these will likely not reach prohibitive proportions. At the time of this writing, the average rate for the 30-year fixed loan has reached 3.87%
The increase in mortgage rates will ease the situation but may not discourage serious buyers from buying a home in 2022.
If buyer demand remains solid, property prices may not decline significantly from the current level.
Low Inventory = High Home Prices
The US real estate market began to feel the pinch on inventory at the start of 2021. Only 1.11 million homes were available for sale as of the end of November. The National Association of Realtors (NAR) claims that this volume reflected a 13% year-over-year (YOY) downturn. The deficiency in supply is expected to continue until the first half of 2022. Thus, home prices are expected to remain high until inventory picks up.
Low housing inventory, which is driving home prices up, is expected to contnue until the first six months of 2022.
Why Housing Inventory Remains Low
Because of the pandemic’s economic risks and other issues, homeowners have put off selling their properties. To make things worse, the increasing cost of building materials and the concerns on labor shortage are slowing down the progress of new home construction.
What’s in Store for Home Buyers in 2022?
Home buyers will be walking on shaky ground for the first few months of 2022, at least.
Prospective buyers with the financial capacity for a cash purchase may just be looking at where and what to buy. They may also consider if the property price is worth the money they will be shelling out. Meanwhile, those who intend to purchase through financing may need to think of factors such as the mortgage rates. Can they afford it? Can they sustain it?
Savvy investors who intend to purchase an investment property will consider the return on investment. If you are looking to purchase for investment, you can use Mashvisor’s investment tools such as the real estate heatmap, which can help you find investment properties to suit your needs.
First-time buyers are in for a rough time, though. They need to contend with the rising down payment requirements, high monthly mortgage costs, and the lack of experience to know when they are getting a good deal.
Savvy or newbie, prospective home buyers may need to save up more money, look for affordable housing, and think of creative strategies to purchase the house despite limited financial resources.
Related: 10 Best Places to Buy Real Estate in 2022
Creative Buyer Strategies
You can look into the potential of any of the following strategies to ease the burden of purchasing a home.
- Buy with someone you’d be comfortable sharing the house with so you can split the down payment and mortgage costs.
- Go into house hacking. This real estate strategy will allow you to enjoy having a primary residence without worrying about the monthly mortgages.
- Look for a fixer-upper. Fixer-uppers are more affordable because they are offered at below-market prices. There will be less competition for fixer-uppers, so bidding for a property won’t be too much a problem. You can fix it based on your budget, taste, and personal style to increase its value. You may begin your search using the Mashvisor Property Finder to look for off market properties for sale.
Related: How to Find a Fixer Upper House for Sale
What Awaits Sellers in 2022?
It’s still a seller’s market in 2022, but don’t put up that “For Sale” sign yet. Find out why.
To Sell?
The mortgage rates may be relatively low despite the increase, but with the imbalance between demand and supply still hovering over our heads, sky-high home prices will still be a major concern for buyers. However, with the number of buyers too eager to acquire a home and are bidding for a property, it remains a robust seller’s market.
Prospects are even brighter for home sellers whose property is located in a place where property price growth is scaling up, and bidding has become a practice. Based on the CoreLogic Report, Arizona has the largest home price growth at 28.4%, Florida at 27.1%, and Utah at 25.2%. Mashvisor’s data as of February 16, 2022, shows the number of listings for sale, median home price, and days on market for these states as follows:
Arizona
- Number of Listings for Sale: 2,780
- Median Property Price: $511,436
- Days on Market:92
Florida
- Number of Listings for Sale: 28,918
- Median Property Price: $680,781
- Days on Market: 90
Utah
- Number of Listings for Sale: 1,025
- Median Property Price: $946,604
- Days on Market: 85
Florida recorded one of the highest increases in home prices across the US in December 2021, according to the latest report by CoreLogic.
Or Not to Sell?
Odeta Kushi, First American Financial Corporation’s deputy chief economist, disclosed that the mortgage rates given to several homeowners had been locked in at below 3% since the beginning of the pandemic. Selling may not be a wise option, given the locked-in rate. Do not sell your property if you have just recently refinanced it.
If you intend to sell to make a new purchase, think again. The 2022 US real estate market features high prices and a scarcity of new homes for sale. Add to that the concerns on employment and job instability, labor shortages, and for some locations, restrictive housing policies. It might be wiser to wait until there’s some semblance of balance in the housing market.
The Bottomline
CoreLogic predicted home prices to increase by 18.5% in 2021. It expects the trend to continue until the first few months of 2021 as the demand for housing continues to exceed the supply.
The predictions seem dire for buyers, especially for first-timers, but they also give a glimmer of hope. The forecast sees the affordability issue and the increasing mortgage rates to temper the price increases sometime during the year. Meanwhile, as the effects of 2021’s wild ride continue into this year, buyers may seek creative strategies to make a house purchase affordable.
On the other hand, Sellers may continue to enjoy the hot seller’s market. However, they should start pushing back on prices to prepare for when the market begins to go back to normal.
Learn more about how to benefit from real estate even in these difficult times with the help of Mashvisor by scheduling a free demo with us. Or, sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.