2022 Housing Market Trends and Predictions
Since the early 2000s, we have not seen such abnormal U.S. housing market behaviors, according to the Federal Reserve Bank of Dallas. In their research paper titled Real-Time Market Monitoring Finds Signs of Brewing U.S. Housing Bubble, researchers highlight the fact that “reasons for concern are clear in certain economic indicators…which show signs that 2021 house prices appear increasingly out of step with fundamentals.” Fundamentals refer to the housing market’s necessary equilibrium conditions that are not currently being met.
Anyone looking to purchase real estate in 2022 knows that the market is in an extremely volatile and overwhelmed state right now. Many Americans specifically feel that the boom following the pandemic has been associated with a huge increase in demand and new construction. Paired with rising interest rates, the market is less than ideal. This, however, is not a complete indication of whether or not one should consider becoming a homeowner in 2022. As the year progresses, many market experts and economists have predicted the changes and shifts that we might see throughout the second half of the year.
As the pandemic and its aftershocks become less and less prominent, we will see the once sharp and unprecedented increase in housing prices grow much slower. Fortune reports that real estate firms predict that “home prices will go even higher over the coming year,” but this does not mean that the rate of growth will continue to shock the market in the same way.
Additionally, according to Logan Mohtashami from HousingWire, higher mortgage rates will give the industry a much-needed chance to increase inventory. Once inventory increases from its current state, the issue of too many people and too little supply will finally be fixed. Forcing individuals out of the red-hot market makes less competition and makes them face an issue of affordability.
While home prices climb beyond affordability for those looking to get in on the real estate action, competition will ease up, especially on homes that are priced higher. Homebuyers generally base their decisions on monthly payments so mortgage rate increases will definitely steer people away from their interest in highly-priced homes. Furthermore, as people begin to get back into the groove of life outside of at-home lockdowns, less time will be dedicated to real estate research and home buying.
Although the market is still red hot and the fear of missing out on prime real estate is driving up market participation, we will see these trends become less overwhelming in the second half of the year. Keeping up with mortgage analyses and other deviations from market fundamentals is key to making a strategic purchasing move in 2022.