The housing market has been on fire for the past couple of years! People have been buying houses in record numbers, causing prices to increase and inventory to plummet.
So, what do the housing trends look like for 2022? Keep reading to find out!
Low Housing Inventory
The total number of unsold homes was down over 16% in November 2021 compared to the year prior. That’s partly because many people are looking to buy right now, and fewer sellers are listing their homes for sale. Unfortunately, fewer houses mean it will be harder to meet buyer demand.
How To Find a Home in a Slim Market
- Sacrifice some wants – be willing to compromise. Give up some “nice-to-haves” for “must-haves.” Find the least expensive home in the best neighborhood you can afford and upgrade it over time.
- Expand your search – perhaps, the location you want to buy in is too competitive. Expand your search to neighborhoods you haven’t considered. You never know what gems are waiting to be found. Work with a real estate agent who knows the area and is familiar with your budget and lifestyle.
- Get preapproved ASAP – You must get preapproved for a mortgage before you go house hunting. This is even more vital when the housing supply is low. Competition is going to be tough. You don’t want to lose out on the home to someone simply because they were preapproved and you weren’t.
The best homes are going to be bought up first.
Near the end of 2021, most homes spent 47 days on the real estate market. That’s about ten days less than the past year, and it looks like this trend will continue in 2022, but only for a little bit.
Over the past two years, the lack of housing inventory has created a logjam of would-be home buyers. It’s going to take time to work through this logjam of home buyers, some estimate a couple of months, but as long as we’re stuck in this logjam, home prices will continue to climb up.
What Do Slim Pickings Mean for Sellers?
Sellers are going to have less competition. Meaning, that even if your home isn’t necessarily appealing to buyers, you still stand a better chance of selling it in this current market. You could also have the upper hand regarding negotiations and final sales price. So, enjoy receiving multiple offers, picking the best one, and moving at a pace that best suits your timeline.
If you buy a new home after selling your current one, you won’t be in the driver’s seat anymore. Decide on the plans for your next home before you sell your current residence.
Home Prices Will Continue to Rise… Slowly
By the end of 2021, the national average home price rose to $363,700. However, the rate at which this increased slowed toward the end of 2021. It’s expected that the prices will continue to grow in 2022, but much slower than we’ve seen in the past couple of years.
What Do Higher Prices Mean for Buyers?
In an expensive market, it’s crucial that you are entirely aware of how much you can afford. Commit to staying within that budget despite the pressure to expand it.
To help you feel confident buying a house in 2022, follow these steps:
- Limit your house payment to no more than 25% of your monthly take-home pay – your house payment includes principal, interest, property taxes, homeowners insurance, and if your down payment is less than 20%, private mortgage insurance (PMI). Don’t forget about homeowner’s association (HOA) fees.
- Save at least 10 to 20% for a down payment – We recommend at least a 10% down payment because anything less will leave you to your neck in interest and fees. Putting 20% or more down is better because you can avoid paying PMI.
- Go with a 15-year fixed-rate conventional mortgage – this is the lowest cost loan. The 30-year mortgage, FHA, VA, USDA, and adjustable-rate mortgages will only charge you thousands of dollars extra in interest and fees, keeping you in debt for decades.
What Do High Prices Mean for Sellers?
Of course, rising prices are a good thing for sellers! If your home is on the market, expect a nice profit. This is excellent news if you have to buy a new home following the sale of your old one. You’ll need those extra funds to cover the rising costs.
To ensure you’re getting the most you can out of your home, wait for the best offer. If you have the time, take it. Remember, the less desperate individual always has the upper hand in negotiations.
Mortgage Interest Rates Are Still Low
A mortgage interest rate is the fee lenders charge as a percentage of your loan amount. For home buyers, it’s been nice and low.
The average rate for a 15-year fixed-rate mortgage dropped to 2.2% in January 2021. While they started rising towards the end of 2021 (closer to 2.4%), and they may continue to grow in 2022 slowly, they are expected to stay relatively low.
That said, in December 2022, a 30-year fixed mortgage rate sat at 3.11%. That rate was up to 5.27% in early May, the highest since 2009.
While still considered low compared to other years, the rising mortgage rates of 2022 will create downward pressure on the housing market. The higher rates will price out would-be home buyers, but it also means that some borrowers have lost their mortgage eligibility.
What Does This Mean for Buyers?
Low interest rates help with affordability but don’t let that pressure you into buying a home you aren’t ready for. It’s still a bad idea to purchase a home you can’t afford, even if the interest rates are low.
Remember to stick to a monthly payment limit, down payment amount, and mortgage type, and you’ll be fine.
What Does This Mean for Sellers?
Low interest rates mean buyers will be more motivated to buy your home sooner rather than later. However, if interest rates rise, expect your home to stay on the market longer.
The Massey Team at Berkshire Hathaway HomeServices Select Properties
Find your perfect home this year with the perfect real estate agent! In this market, it’s nice to have a helping hand guide you through the ins and outs of all the various trends that make it difficult to find your next home.
Contact us today by visiting our website at https://masseyteam.bhhsselectstl.com/, or call us at (618) 791-5024 & (618) 791-9298.