Busy is an understatement for the real estate market in the spring. We had one of the most competitive home-buying seasons ever in 2021, including heated bidding battles, record-high prices, and little availability. Is a comparable scenario expected in 2022?
Here’s what to expect this spring in the real estate market.
High Demand:
Millennials are still in their prime home-buying years. In 2022, 45 million millennials will be between the ages of 26 and 35. This means more first-time buyers shopping for houses. So, expect fierce competition this spring, particularly for entry-level properties.
Low stock:
The housing scarcity has existed long before the pandemic. Supply chain concerns and labor force shortages have worsened the situation as homebuilders tried to keep up with demand. Likely, we may see a minor increase in inventories over the spring and summer months. However, it will not be enough to meet demand. This might lead to further bidding battles, albeit not as many as last spring.
Price increases:
The inventory shortage will continue to drive up costs, perhaps pricing some purchasers out. On the plus side, economists expect house price growth to moderate from last year’s frenzied pace. Likewise, in 2021, housing prices grew by approximately 18% by year’s end. In 2022, experts expect housing prices to climb by 3% to 8%.
Mortgage rates rise:
Notably, mortgage rates are still historically low. But, the days of rock-bottom rates may be gone. Mortgage rates have already reached pre-pandemic levels. Besides, the Federal Reserve plans to hike short-term interest rates three times this year to combat inflation. Indeed, higher rates may limit your purchasing power. However, they may help to enhance affordability by reducing demand and properties prices.
Home equity growth:
While rising property prices have hampered buyer affordability, they have benefited homeowners. Home equity is still at record highs. So, more homeowners will probably take advantage of this spring by improving their homes or selling them to profit from the equity.
Tips for Buying a Home this Spring
- Pre-qualify and set your budget: Are you looking for a new home? As a first step, contact your mortgage lender. Pre-qualify and know your budget so you can purchase competitively and feel sure.
- Hire an experienced real estate pro: They can speed up our property search and present you to other communities and listings. Also, a smart agent sets reasonable expectations and negotiates for you.
- Build credit and savings: Credit and down payment enhancements can lower mortgage rates, making homeownership more accessible in a growing rate environment.
- Avoid buyer’s remorse: Prepare a list of wants vs. needs to avoid decision fatigue. Know when to walk away from a transaction.
Tips for Selling Your Home This Spring
- Hire a local realtor: You want to deal with someone who has sold properties in your area and knows the market.
- Fix problems now: Labor and supply limitations may prolong beyond expected necessary repairs and upgrades. Discuss with your agent which repairs are essential. Then, perform as many of them as you can.
- Set a competitive price: While it may be a seller’s market, avoid overvaluing your home. Let your realtor research comps and adjacent properties to ensure you hit the sweet spot for buyers.
- Be quick to react: Depending on local demand, you may receive many bids in a short time, even on the same day. Determine your priorities ahead of time to evaluate offers quickly and confidently.
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