A Return to ‘Normal’?

The State of Real Estate in 2022

The 2021 Real Estate Market will go down in the history books as one of the most competitive Real Estate Market on record. Covid19 initiated a buying frenzy that caused home prices to appreciate nationwide by 19.9% between August 2020 and August 2021.

But by the fourth quarter, the housing market began to simmer.  In the month of October, only 60.3% of sales had a bidding war—down from a high of 74.5% in April.

While this could be because of the holiday season in the 4^th quarter, it could also mean that the real estate run-up may have passed its peak.

What is the industry predicting for the U.S.A housing market in 2022?  

MORTGAGE RATES will start to rise

Most economists expect to see mortgage rates gradually rise this year after hitting record lows in late 2020 and early 2021.   FMHC forecasts the 30-year fixed-rate mortgage will average 3.5% in 2022, up from around 3% in 2021.

The Mortgage Bankers Association predicts that rates will tick up to 4% by the end of the year. "Mortgage lenders and borrowers should expect rising mortgage rates over the next year, as stronger economic growth pushes Treasury yields higher," said Mike Fratantoni, chief economist for the Mortgage Bankers Association at their 2001 Annual Convention & Expo in October.⁵

It is important to keep in mind that even a 4% mortgage rate is low when compared to historical standards. According to industry trade blog The Mortgage Reports, “Between 1971 and December 2020, 30-year mortgage rates averaged 7.89%.”⁶

What does it mean for you?  A low mortgage rate can reduce your monthly payment and make homeownership more affordable.  Fortunately, you can still lock in a historically low rate. Whether you’re hoping to purchase a new home or refinance an existing mortgage, act soon before rates go up any further. We’d be happy to connect you with one of our trusted lending professionals in our network.

THE MARKET WILL BECOME MORE BALANCED

2021 we experienced one of the most competitive real estate markets ever.   Fears of Covid and the shift to remote work initiated a huge rise in demand.  And at the same time, many existing homeowners delayed their plans to sell, and supply and labor shortages hindered new construction.

This led to an extreme market imbalance that benefitted sellers and exhausted buyers. According to George Ratiu, director of economic research at Realtor.com, “Prices and sellers reached for the moon [last] year. It looks like we are now about to move back to earth.”

Data from Realtor.com released in November showed that listing price reductions had more than doubled since February 2021. And the average days on market (an indicator of how long it takes a home to sell) have been slowly creeping up since June.

What’s causing this change in market dynamics? The real estate market typically slows down in the fall and winter. But economists also suspect a fundamental shift in supply and demand.

At the National Association of Realtors’ annual conference last November, the group’s chief economist, Lawrence Yun, told attendees that he expects increased supply to come from an uptick in new construction—which is already underway—and an end to the mortgage forbearance program. “With more housing inventory to hit the market, the intense multiple offers will start to ease,” he said.

Demand is also predicted to wane slightly in the coming year. Rising mortgage rates and record-high prices have made homeownership unaffordable for a growing number of Americans. And in a recent Reuters poll, nearly 80% of property analysts said they expect housing affordability to worsen over the next several years.

What does this really mean? If you were unsuccessful in buying a home last year, relief may be on the horizon.  The Increased supply and softening demand could make it easier to finally secure the home of your dreams. If you’re a seller, it’s still a great time to cash out your big equity gains! And with more inventory on the market, you’ll have an easier time finding your next home. Reach out to us for a free consultation so we can discuss your specific needs and goals.

HOME PRICES ARE LIKELY TO KEEP CLIMBING, BUT AT A SLOWER PACE

Nationally, home prices rose an estimated 16.8% in 2021.  But the average rate of appreciation is expected to slow down in 2022.

Danielle Hale, chief economist at Realtor.com, told Yahoo! News, “Home asking prices have decelerated in the second half of 2021, with median listing price growth slipping from a peak of 17.2% in April to just 8.6% in October.”

But experts are disagreeing on how much more property values can continue to climb this year. Goldman Sachs believes that home prices will rise by 13.5%, while FNMA and FMHC are forecasting a 7.9% and 7% rate of appreciation

But not all analysts are as bullish. The National Association of Realtors are only predicting a 2.8% rate of appreciation for existing homes and 4.4% for new homes, while the Mortgage Bankers Association expects the average home price to decrease by 2.5% by the end of the year.

According to Hale, “With prices near all-time highs and mortgage rates expected to rise, we expect this slowdown in prices to continue.”

What does this really mean?  If you’re a buyer who has been waiting on the sidelines for home prices to drop, you may be out of luck. Even if home prices dip slightly (and most economists expect them to rise) any savings are likely to be offset by higher mortgage rates. The good news is that decreased competition means more choice and less likelihood of a bidding war. We can help you get the most for your money in today’s market. Contact us today to assist

RENTS WILL CONTINUE TO RISE

Along with home, gasoline, and used vehicle prices, rent prices rose dramatically last year. According to CoreLogic, in September, rents for single-family homes were up 10.2% nationally year over year.¹¹ And economists at Realtor.com expect them to climb another 7.1% in 2022.¹²

“Homes are expensive now...but for most people, the comparison that is most important is how that cost of homeownership is going to compare to the cost of renting,” Zillow Senior Economist Jeff Tucker told CNBC in November.

 Tucker also pointed out that rent is less predictable than a mortgage—and more likely to go up along with inflation.

 Real assets, like real estate, are often used as a hedge against inflation. That’s because property values typically rise with inflation.   And when a homeowner takes out a mortgage, they lock in a set housing payment for the next 30 years.  Imagine if your housing payment was only that of 30 years ago. 

 In contrast, renters are at the mercy of the market—and they don’t gain any of the benefits of homeownership, like tax deductions, equity, or appreciation.

George Ratiu of Realtor.com told CNBC that he advises buyers to consider their budget and time frame. If they plan to stay in the home for at least three to five years, he believes it often makes sense to buy.

Fortunately, it’s shaping up to be a better year for buyers. “I think 2022 has the promise of providing less competition, a lot more homes to choose from, and, as a result, a lot more approachable prices,” Ratiu said.

What does this really mean?  Both property and rent prices are expected to continue rising. But when you purchase a home with a fixed-rate mortgage, you can relax knowing that your monthly mortgage payment will never go up. Whether you’re a first-time homebuyer or a real estate investor, we can help you make the most of today’s real estate market.

 WE’RE HERE TO GUIDE YOU

While national real estate numbers and predictions can provide a “big picture” outlook for the year, real estate is local. And as local market experts, we can guide you through the ins and outs of our market and the local issues that are likely to drive home values in your neighborhood.

If you’re considering buying or selling a home in 2022, contact us now to schedule a free consultation. We’ll work with you to develop an action plan to meet your real estate goals this year.

For over 20 years we have been helping our Clients Sell, Purchase, Invest and Lease their homes in the Fort Lauderdale Real Estate Market.  Let us now help you

Tom Wolf Team are top producing Realtors at RE/MAX Experience

SHOWING YOU THE WAY HOME