What to Expect from the 2022 Real Estate Market
Are we in a bubble? Will prices go up or down? Is there really a housing shortage? With so many questions about the real estate market, we're here to go over buyers' characteristics, give some insights to our fellow Realtors® and peel back the curtain on the market's moves.
Even if you're not planning to buy or sell in the new year, we want to make sure you know what to expect from the 2022 real estate market, so you have expert data to take to your dinner parties and colleagues!
Much of the following is based on data from the National Association of Realtors®, Brian Buffini and Buffini and Company, and Lawrence Yun is a Chief Economist and Senior Vice President of Research at the National Association of Realtors. Armed with these strong predictions, you'll be a pro at navigating the real estate landscape in 2022.
The 2022 Buyer Landscape Predictions
In 2021, we saw an increase in first-time homebuyers from 31% in 2020 to 34% in 2021. This tells us there is still a huge demand for individuals to become homeowners. Of all purchases, 11% were multi-generational, meaning families are pooling their money together to buy a bigger home the whole family can live in and, in some cases, choosing homes specifically for aging parents to be taken care of. This is a consistently increasing trend.
Only 15% of buyers purchased a newly constructed home compared to 29% of new-build purchases in 1989. This is due to a consistent inventory shortage even with new construction continuing across the country. In 2008, there was a significant drop off of new construction due to the recession, and the trends haven't yet caught up with demand.
The Home Builders Association, at their annual forecast luncheon, mentioned this demand looks to last the next 5-10 years.
We also saw buyers purchase at the asking price most of the time, and 29% of buyers purchased for more than the listing price last year.
So what can buyers expect in 2022? Over the last decade, there has been an underproduction of single-family homes, but by Spring of 2022, we will finally start to see more inventory completed compared to the year prior.
Mortgage rates are still low, people have money ready for down payments, and personal savings rates are historically high. These factors contribute to buyers having the ability (and desire) to buy while the cost of living increases and the rates are expected to creep up. According to the Fed, everyone surrounding the real estate market should be prepared for mortgage rates to increase from 3% to 3.7% slowly and land at 4% by the end of 2022.
The 2022 Seller Landscape Predictions
In 2020, there were 5.7 million home sales, and in 2021, there were about six million home sales — an increase of 7%.
Last year, we saw 80-90% of homes going under contract within a month or less, which is a speed we've never seen before. Factors that contributed to the speed of going under contract were:
Uncertainty surrounding the pandemic creates a sense of urgency
Buyers taking advantage of low-interest rates
Needing a larger home to accommodate working from home
Moving states and neighborhoods due to remote work
These factors caused demand to increase more than supply was available, making sellers quick to find and accept a suitable offer.
Considering the ongoing effects of the pandemic and the higher interest rates expected in 2022, Lawrence Yun predicts a 2% reduction in home sales. As a seller, that means value may not come down yet properties may be on the market just a little longer.
The 2021 Realtor® Landscape
In 2019, 1.4 million real estate agents were members of the National Association of Realtors®; in 2021, there were 1.48M, with a projection that by the end of 2022, there will be 1.52 million. This shows us that we have more real estate agents than ever before — which means many less experienced agents are entering the market.
As a Realtor®, you may want to be communicating the previous year's trends to your clients about most buyers purchasing at asking or above. Additionally, on average, buyers are searching for a home for eight weeks and looking at an average of eight houses. Setting expectations for what to expect in a changing market is vital.
Good news — 90% of buyers said they would use or recommend their agent to others! However, 28% said they couldn't remember their agent's name within a year. Whatever your method is for keeping in contact and maintaining a good relationship with your past clients, it's essential! (Hey clients, please don't forget our names!)
2022 is an excellent time to be in the real estate market.
It's projected to be a very healthy market despite inflation potentially impacting housing and loan qualification affordability.
Have more questions? Reach out to our team! We'd love to answer them.
