- Juri Groenland & Patti Williams
Daily we get the question….”How’s the market and what do you think will happen in 2022? It’s a complex answer, and we can only give you our best educated guess as to what we expect for this year. The truth is…we don’t know definitively, however based on our knowledge of the market here are things we do know…
The National Association of Realtors (NAR) held their annual Real Estate Forecast Summit in mid-December during which economists and policy makers discussed current trends and data to examine where they expected the market to go in 2022. With that discussion as a resource, we’ll get into some of our thoughts.
Our opinion is that now is a great time to list your home AND to buy - why? Everyone is likely aware that sellers are getting top dollar for their properties - especially those in great condition, and in turn are paying a premium at their new location. Overall, we aren’t seeing home prices coming down, primarily due to the inventory of homes for sale being at an all-time low. It comes down to simple economics…lack of supply coupled with high demand! Roughly 40 million baby boomers had an average of 80 million children who are of prime purchasing age for first or second homes. Because of these ongoing market dynamics, Sellers often are receiving multiple offers and buyers are willing to go the distance to get what they want which is continuing to drive prices higher.
As for interest rates, we are expecting multiple interest rate increases over the course of 2022. The Federal Reserve has signaled it would be raising rates, attempting to corral inflation which hit a nearly 40-year high in December. Some local lenders are already seeing their rates push up above the 4.0% range even for those with high credit ratings. Although though rates are ticking up, they are still near historic lows. This is why we think the time is right to buy - because your buying power right now with the rates increasing will change over time, so time is of the essence! Think of it this way: every 1% increase in interest correlates to 1% increase in your mortgage payment over the course of a year so for example a $500,000 loan that increased from 4% to 5% would see a $5000 increase in the payment over the year- roughly a $416 a month increase!
So why not just rent and wait it out? Unfortunately, you’ll also be challenged by the trends in rental prices as Dr. Danielle Hale, chief economist for Realtor.com, stated recently that her expectation was that “rents will continue to rise and in 2022 outpace home price growth.”3 We are seeing rental prices far higher that what a mortgage would cost for the same size property.
These things we do see happening in the market in 2022 and beyond: an increase in interest rates, healthy increases in home values, a continued lack of supply and increases in rent. Our best advice is to hire a real estate agent that you trust to navigate you through the purchase of new or resale homes, commercial leases and purchases. A real estate professional is aware of the market dynamics and will look out for your best interests. For further information see the link below:
1 - Home Prices in 2021 rose 16.9%, the highest on record
2 - U.S. Consumer Prices Post Biggest Rise in Nearly 40 Years; Inflation Close to Peaking