The social upheaval of the last few years due to the coronavirus pandemic has impacted the U.S. housing market in a number of ways. Mortgage rates dropped dramatically while home values climbed. After record-breaking home sales in 2020 and 2021, the market is poised to settle a bit in 2022. Here are five predictions of what the next year can hold.
1. Rise in Mortgage Rates
Covid knocked mortgage rates into the basement in 2020, with the average 30-year loan rate dropping to a record low of 2.93%. With rising inflation and consumer spending, mortgage rates are rising and expected to continue. At the start of 2022, experts predicted 30-year loan rates would reach 4% by year-end, but the increase has outpaced initial projections and has already topped 5%. However, the housing market is historically very resilient to rate hikes. In the past, housing sales continued strong even with rising mortgage rates.
2. Plateau in Home Values
Home prices rose sharply over the last two years. The median price of houses sold in March 2020 was $280,700. This increased 29% to $362,800 by June 2021. While there is nothing to support the housing bubble bursting at this time, the rapid rise in prices should slow in 2022. Home prices are predicted to rise 2.8% over the next year, which is a significantly lower rise than the increase seen over the last few years. This is good news for buyers, who can look forward to home values within their pay ranges and the prospect of house shopping without bidding wars.
3. Lowered Vigor of iBuyers
The pandemic offered the perfect environment for instant buyers like Offerpad, Opendoor, and Zillow Offers, who routinely paid higher than market price for properties. As the market settles down a bit in 2022, iBuyers will continue pursuing properties, but their offers will be less generous and much closer to market value.
4. Continued Affordability Issues
The National Association of Home Builders reports the median price of all homes sold in the U.S. as $355,000 in mid-2021, up from $320,000 in late 2020. These prices are unaffordable for nearly half of the families earning an average level of income in this country.
5. People Move From Cities To The Suburbs
Ever since the rage of the Covid-19 pandemic, people have been migrating from major cities to the suburbs. The largest metro areas such as New York City and San Francisco are expected to recover, however the trend of opting out of big city living is expected to continue for the next 3-5 years. Two reasons for this are necessity and choice; the middle and lower classes are being pushed out of cities due to rising costs and job losses, while the upper class are relocating by choice. The suburbs are also an attractive option due to lower-priced housing and lower taxes.
The housing market has been volatile over the past few years, but 2022 looks toward leveling out. If you are in the market to buy or sell, contact our Chapel Hill Realty Specialists online, or call (919) 942-4149 for assistance in navigating the year’s new trends.