Opinion: Will The Real Estate Market Crash or Boom in 2022?
There’s no doubt that the housing market has seen some wild times over the past decade, and as 2021 draws to a close, buyers, sellers, and investors are all wondering what 2022 will bring? In the latter half of 2021, even amid the Covid-19 pandemic, mortgage rates remain low and savings have increased as the job market rebounds from the hit it took when virus restrictions first made the scene. Home prices remain high and inventory is still an issue, but for both buyers and sellers, right now is a great opportunity to make a purchase or to sell.
Age is Steering the Housing Market
Although there are a number of factors that play into the housing market at various times throughout each year, the current boom is driven in part due to age. Baby Boomers are either retired or are retiring, and many are seeking to downsize. At the same time, Millennials are at or nearing prime time for home purchases.
This shift in inventory from one generation to the next has led many reluctant sellers to recognize the money that can be made off of the current demand. At the same time, younger buyers have more in savings to invest in a down payment, potentially making the home buying process easier.
Keeping an Eye on the Bubble
As was seen in the late 2000s, Realtors, buyers, and sellers need to keep a close eye on the potential for a bubble to build and burst in the housing market. If home prices continue to grow and mortgages become easier to obtain, home values could quickly fall apart. This scenario left many upsidedown in their home values after the market tanked in 2008.
Thankfully, lessons learned from the 2008 financial crisis have cooled things down to a reasonable level in the hopes of avoiding the same mistakes. While prices have reached new highs month after month, new home sales and construction have slowed. This isn’t necessarily bad since demand is still at all-time highs, and the aforementioned transfer of homes between generations is a factor. This should give new home construction a boost in confidence to continue supplying inventory.
Rate Changes Around the Corner?
Another factor at play in determining the boom-or-bust outcome is mortgage rates. Lenders have been able to offer loans at historically low rates in recent years, and 2021 has been no exception. Lower rates have not only led to many first-time home buyers jumping at the opportunity to make a purchase, but they have also driven refinance opportunities. Rates can’t stay low forever, but a market correction may be further into the future than 2022.
What Does the Housing Market Look Like in 2022?
Whether you want to sell your house for cash, purchase a first home, refinance an existing home, or anything in between, the market is right for everyone at the current moment. Moving into 2022, it’s likely that price increases will slow and mortgage rates will rise modestly in order to tamp down the development of a bubble.
Inflation may also hamper home prices, but demand isn’t going anywhere anytime soon. No matter the situation, however, your Realtor should be able to provide guidance that speaks to your specific needs and the factors affecting your geographic area.