The housing market was on a wild ride this year. Here’s what to expect in 2022 | News

The US real estate market has had a scorching year. Home sales are on track to hit their highest level in 15 years, with around 6 million homes sold in 2021.

But whether you benefited from this surge depended a lot on whether you were selling a house or buying one.

Homeowners saw average home prices soar nearly 20% in the third quarter compared to a year ago, according to the Federal Housing Finance Agency. It was the largest annual increase in home prices in the history of the agency’s home price index. And, in some hot markets, the price increase has been double.

Homes have also sold at an all-time high, with sellers often submitting multiple competing bids and all-cash bids. Even the filthy or burnt houses sold out quickly and for amounts well above the asking price.

For buyers, it was a different story. As mortgage rates started the year at record highs, it was even difficult to find a home to buy. The stock of available housing hit an all-time low at the start of the year and competition has been fierce.

Many potential buyers have left the depressed and homeless market. As a result, rental demand jumped and rents rose across the country.

“It’s been a crazy year,” said Matt Holm, a Compass agent in Austin. Last January, it marketed a smaller five-year-old home at $ 425,000, higher than comparable sale prices, and was inundated with offers. “I stopped counting at 35 offers,” he said. The house sold for $ 545,000, a 30% increase from the list price.

Another buyer, who bought a luxury lakefront home for $ 6 million in 2020, was offered $ 9 million a few months later and $ 11 million two months later by desperate buyers for a lakeside property, Holm said.

“My salespeople said it was a lot of money,” Holm said. “They wanted to sell and get something as good or better. But they realized they shouldn’t sell because to get something a little better than they had was going to cost $ 18-20 million. dollars. That’s a remarkable jump for a year calendar. “

Without a doubt, the housing market was on a wild ride in 2021. Here’s what to expect as the new year approaches.

No more record mortgage rates

The year began with the lowest interest rates on record, with average rates for a 30-year fixed-rate mortgage at 2.65%. But they didn’t last long. As of April 1, it had peaked at 3.18% in 2021. Rates have fluctuated since, with the 30-year being pegged at 3.05% last week, according to Freddie Mac. And we can expect rates to rise even more in the new year.

The Federal Reserve has given several signals that its pandemic monetary policy will end as it seeks to curb inflation. Ultimately, this will push interest rates up.

The Fed’s revised policy won’t put a hole in the pockets of those looking to buy a home over the next few months, but they might want to act soon, said Melissa Cohn, regional vice president and executive mortgage banker at William Raveis. Mortgage. .

“Mortgage rates are expected to stay capped at around 3% until the end of the year and hopefully in the first two months of 2022,” said Cohn, who expects rates to rise to as low as a half a percentage point over the next two months.

Likewise, Lawrence Yun, chief economist of the National Association of Realtors, expects the 30-year fixed mortgage rate to rise to 3.7% by the end of next year, but noted that ‘it will still be lower than the pre-pandemic rate of around 4%.

“Rising mortgage rates, coupled with inflation that eats away at savings, will have a negative impact on buyers,” said Allison Salzer, a Compass agent in San Francisco. “This will affect buyers of low-cost and mid-priced homes more than luxury buyers.”

Inventory will remain tight

Even though more properties became available as the spring home buying season warmed up this year, there were also more people looking to buy, creating fierce competition and pushing up prices. to the top.

There were so few houses that people took extreme measures like offering to buy the seller’s next house for them, giving competing buyers thousands of dollars to go away and paying up. $ 1 million more than the asking price for the house. A Maryland home received 7 all-cash offers.

Inventory was tightest at the lower end of the market. Homes priced under $ 200,000 have been difficult to find, with the number of available properties falling 19% this year from last year, while there was a 40% annual increase for homes over $ 600,000, according to HouseCanary, a real estate data company.

While the inventory situation is expected to improve in 2022, it is not expected to improve much. Inventories will remain limited and will only increase by 0.3% in 2022, according to a provide.

“The biggest factor that I see affecting the housing market in 2022 is low stock,” said Paulo Prietto, a Compass agent in Orange County, Calif. “Although inventories remain low, buyers will become more accustomed to the lack of choice and continue to compete aggressively to buy homes.”

As long as this happens, prices will continue to rise.

Home prices will continue to rise

Home prices increased almost everywhere in the country in 2021.

While existing home sales hit a median price of $ 353,900 in November, up 13.9% from a year ago, new home prices were even higher. New homes hit a median price of $ 416,900 in November, according to the US Census Bureau, about 19% more than a year ago, and another new high.

While we won’t see the double-digit gains made last year, prices are expected to continue rising in 2022 at a slightly more moderate pace.

A group of top 20 economics and housing experts brought together by the National Association of Realtors predicted median home prices will rise 5.7% next year. Participants in the NAR survey said they expect the housing market and the economy as a whole to normalize next year as the Fed tries to keep inflation under control.

“The slowdown in price growth will in part be the result of interest rate hikes by the Federal Reserve,” Yun said.

First-time buyers will continue to face challenges

The prevalence of all-cash offers, the limited availability of housing and soaring prices have pushed many first-time buyers out of the market in 2021.

By the end of November, the share of first-time buyers had fallen to 26% from 32% a year earlier, the lowest level since the National Association of Realtors began monitoring in 2008.

“We are creating a divided society,” Yun said. “People don’t feel like they are participating in what they see as American life by owning homeownership. All of their work to accumulate savings may seem less meaningful in the face of rising prices. “

Not only were prices rising faster than people could save for a down payment, many types of mortgages preferred by new buyers, like FHA and VA loans, were often overlooked for cash transactions or conventional loans.

The inventory of homes at the lower end of the price range was so tight that the number of sales between $ 100,000 and $ 250,000 fell nearly 20% in November, according to NAR.

And while new construction homes are now starting to come online, most are priced outside the typical budget of a first-time buyer.

“Builders are focusing more on high priced homes, with the percentage sold under $ 300,000 falling to just 14% from 33% a year ago,” said Robert Frick, business economist at Navy Federal Credit Union.

But many hopeful buyers say they’ll be back in the spring, armed with the insight they gained from a frustrated search last year, according to a recent poll from

“Despite a difficult year, aspiring first-time buyers are surprisingly optimistic for 2022,” said George Ratiu, Realtor.comresponsible for economic research. “They see the New Year as another opportunity to make their dream of owning a home come true.”

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