SPRING 2022 HOMEBUYING SEASON PREVIEW
Main Takeaways for Buyers
- Low housing inventory and high demand will create a strong seller’s market, but not as intense as the peak of 2021.
- Home prices are expected to continue rising, but at a slower pace than last year.
- To avoid house buying FOMO (fear of missing out) and panic buying, know what you can afford and stick to a realistic budget.
Main Takeaways for Sellers
- It will still be a strong seller’s market, but compared to 2021, there will be a smaller likelihood of a bidding war driving up your sale price.
- Get ahead of preparing to sell your home. Repairs and upgrades are taking longer to schedule and complete due to shortages of supplies and labor.
- All real estate is local. Some markets, or sub-markets, may be stronger or weaker than others.
- Work with a local real estate professional that knows your targeting market.
The 2022 real estate market is shaping up to be something closer to normal.
As we approach the busy spring homebuying season, homebuyers are still likely to face an uphill battle, but it shouldn’t feel anything like 2021.
Home values skyrocketed by nearly 20% in 2021, according to the most recent data by the S&P Case-Shiller national index of home prices. While housing prices aren’t expected to drop this year, the increasing rate of prices should slow down. Many experts believe home values will increase at roughly half the rate (single-digit increases) we saw during the peak of 2021.
Buyers may still face bidding wars, but they aren’t likely to be as intense or as frequent. That means sellers may not be as selective when choosing between offers. In 2021, all-cash offers and conventional loan offers with appraisal contingencies waived were often needed to win the bid. This year as a buyer, you may be able to be more flexible with the terms of your purchase contract, even if you aren’t necessarily getting a deal on the price.
If you’re planning on buying or selling a home during the spring 2022 homebuying season, here’s what four experts forecast the market to look like and what you can do about it.
WHAT TO DO ABOUT RISING MORTGAGE RATES
Today’s mortgage rates are about 1% higher than they were this time one year ago. Experts say several economic factors are pushing interest rates up this year: The Bureau of Labor Statistics (BLS) reported recently that inflation climbed again in February and is the highest in four decades at 7.9% year-over-year. Expectations are that the Federal Reserve will start raising its benchmark short-term interest rate in March to address the high inflation.
What this means for spring 2022 homebuyers is that 1% difference in mortgage rates can eat into your buying power compared to last year. Yet experts tend to agree not to time the rate market and buy when the time is right for you. Experts also point out that these 4%+ rates we are seeing right now are still considered favorable from a historical perspective. It was only a few short years ago when a “good rate” was around 5%.
Preparing to Buy During the Spring 2022 Homebuying Season
In the coming months, mortgage rates and home prices are forecasted to rise. This will cut into your buying power, so it’s important to begin preparing financially as far in advance as possible. Building your credit score can help you qualify for a lower mortgage rate. You’ll want to save for a down payment, closing costs, and unexpected repairs and maintenance. Now is also a good time to start looking into first-time homebuyer programs. These programs can provide thousands of dollars to put toward your down payment or closing costs if you qualify.
Overall, most housing markets will be competitive, although some may be tougher than others. Brunker believes the increased flexibility to work from home could strengthen demand in certain areas. Neighborhoods close to large cities but still an hour or two drive could be appealing. “I think those types of areas will see a more rapid appreciation,” Brunker says. This is something to keep in mind as you determine where you want to buy.
First-time buyers looking for more affordable homes may also face more competition. “One of the segments of the housing market that’s been tougher to break into is that starter home price point,” Kushi says. There is a large demographic hitting the prime first-time buyer age range, and builders have struggled to build enough affordable homes for that type of buyer.
With it still being a strong seller’s market, that means you’ll need to be patient as a buyer. You don’t want to panic buy and end up with a home purchase you have regrets about. Given that specific areas or types of homes will have more demand, you may want to be more flexible with where you live or what you buy. A condo or townhouse a bit further away from where you originally planned on moving could be more affordable than a single-family home in an urban area. You may not find your dream home today, but a home that works for you right now can be a stepping stone to another home down the road.