The Covid-19 induced pandemic that lasted for more than two years wreaked havoc across industries worldwide. From housing to retail, every market received a setback as the virus continued to rage across the globe.
The pandemic also altered the real estate market in the US, especially the housing sector. Home prices rose while interest and mortgage rates pummeled to new lows. However, after a volatile period from the start of 2020 up till December 2021, the housing market is expected to remain steady in 2022.
Here are some of the biggest Housing trends and forecasts that are expected this year:
2022 Housing Market Forecast
The new year brings a lot of hope and positive expectations for investors and homebuyers. Most experts believe that the worst is behind us, and the real estate market as a whole will steady its course in 2022.
- Mortgage Rates could rise.
As the average 30-year old loan rate drastically dropped to 2.93% in January last year and spent most of 2020 under the cosh, this is the year when experts believe that mortgage rates will finally find their feet.
Much of this presumption lies in the fact that both consumer spending and inflation are on the rise, which is, in turn, driving mortgage rates higher. When the rates fell back in 2020, the housing sector saw a boom in the country as people looked to take advantage of the opportunity.
However, the rates are expected to rise this year onwards, with the Mortgage Bankers Association predicting the average rate on a 30-year loan to reach 4% by the end of the year.
Though the mortgage rates are expected to rise, it’s still unclear how it will impact the price and sale of residential property in the country.
- Housing Rate Appreciation could slow down.
Inflation rates on home prices are steady after long spells of volatility. The median price of homes sold in the country rose 29% from 2020 to 2021 but has stagnated since then.
While the price appreciation in 2021 was 14.7%, it’s expected to come down drastically this year. The slowdown is a key balancer for the housing segment, for as long as the price appreciation doesn’t slow down, the price of residential real estate won’t overcome the rise in wages. This will lead to less bidding competition for properties.
This year, the housing sector is most likely to remain stable with far, and few concerns fall.
- Housing Inventory could remain Low.
The home inventory saw a sharp decrease in the curve for most parts of 2020 and 2021. The primary reason for homeowners not listing their property was that it was a challenge to find a new home within their budget.
Moreover, construction was not the answer due to the supply chain being immensely battered by the pandemic. But the demand in the housing sector is quite high, and it’s supposed to be so this year.
All of this means that a low housing inventory is expected to be the trend for this year as well.
- Rental Prices may continue to Rising
As was the case since the pandemic, rental rates in the country are expected to hold an upward trajectory this year.
The reason for the increasing rental rates is that the demand for rental housing is high, but there aren’t enough units to fulfill them. With the demand far exceeding supply, rental rates have risen sharply.
Additionally, the high rate of construction material and unpredictability of the supply chain has led to further challenges for builders to meet the rental demands in the country. Homeowners looking to rent out their property stand to gain this year as well, but it’s a hard pill to swallow for renters to meet the rise in rental costs.
- Home Deals could be cut short.
During the boom of the housing sector in the pandemic, instant buyers went on the aggressive. The resultant was premium bids, even on mid-market segment properties.
Many property management companies indulged as instant buyers and ended up paying homeowners way above the market price for their property, even as per the inflated market.
This year, however, things are expected to slow down. Instant buying may still be the case for various brokerage firms, but the hyper-selling frenzy of last year is not expected to repeat. In other words, expect generous offers from instant buyers this year.
- Housing Affordability may not improve.
The Coronavirus-induced pandemic had an adverse impact on housing affordability. Amidst the decreasing wages and shortage of residential real estate, the National Housing Affordability fell considerably. Amongst the most affected were the top-tier metro cities, with Los Angeles being hit the hardest in terms of housing affordability.
With the rise of the median prices for properties sold, it has become tough for a majority of working-class Americans to afford a new home. The only respite for homebuyers was the fall of the mortgage prices, but that’s expected to rise again this year.
Cash Deals to remain in Trend.
Last year, cash transactions became the norm across the segments, with many investors willing to pay cash and ditch mortgage loans altogether.
They didn’t need to comply with the various requirements like appraisals and inspections to complete the transaction, as with home buyers availing mortgage loans. And this trend is expected to continue this year as well.
With many large and even mid-sized investors willing to pay cash, the market may become highly competitive for regular buyers who may not compete with cash buyers.
These were some of the major trends expected to shape up the housing market in the US this year. In a nutshell, the market is expected to steady up more than the previous years, with a few segments to continue to rise this year.
If you’re about to purchase a new home, you can follow these trends and the progress of the housing sector in the country in the ensuing months.
Are you looking to buy or rent a home in Temecula? Get in touch with us to find the home you’ve always dreamt of that falls right in your budget. We’re a professional team of brokers who strive to find the perfect deal for you and your family.