Dear Olivia,
I have been saving for a new home for a few years now, and I expect that I’ll finally be ready to purchase a home in 2022. What should I expect the market to do next year?
Sincerely,
Worried About the Future
As wild as 2021 was for real estate, it’s understandable that you’re a little worried about what 2022 might hold. And while we can’t know for sure what will happen, there are a few good assumptions that we can make about what the housing market might do in the new year.
Inventory Will Remain Low (Initially, at Least)
One thing is for sure – inventory in the new year will continue to be low. Part of the reason for this is certainly the seller’s market that we’ve been in. Inventory has been low for months and it will take some time before we start to see inventory levels that are closer to normal.
Another component of this is simply the time of year. Winter is a slow time for home sales and this winter will be no exception. But as the weather warms up, we usually see an increase in inventory. Perhaps by spring the extreme seller’s market will ease and there will be more properties from which to choose. I would not be surprised, though, if we continue to have low inventory levels in Fremont County through much of next year.
Interest Rates Will Go Up
It would be hard for interest rates not to go up given their historic lows in 2021. As the calendar turns to 2022 and we progress through the new year, I think we’ll see interest rates slowly rise.
The Mortgage Bankers Association recently predicted that interest rates will be around the 4 percent mark by the end of 2022. That represents about a one percent increase over what mortgage interest rates are right now.
As interest rates rise, your purchasing power decreases, so it’s important to keep a close eye on what interest rates are doing. While it’s important not to rush into the decision to buy a home, the longer you wait, the less monetary power you are likely to have in the new year.
Home Prices Will Level Off
As we look back at 2021, there are a lot of crazy numbers to digest, one of which is how much home prices have increased.
According to the Federal Housing Finance Agency, home prices soared 18.5 percent from August 2020 to August 2021. This is a nationwide average, so some areas have experienced even higher price increases.
But, home prices should level off next year. This doesn’t mean that home prices will decrease, though. Instead, much smaller price increases are expected – anywhere from 2 percent to 7 percent, depending on who you ask. In Fremont County, prices might start to increase more rapidly next spring as real estate activity kicks up a notch after winter is over.
In other words, 2022 might be a mixed bag for buyers and sellers alike. While inventory is still low, we’ll continue in a seller’s market, which is obviously an advantage is you’re selling a home. If home prices slow down, that’s an advantage for buyers, but, unfortunately, as interest rates rise, buyers’ money won’t go as far.
Ultimately, I expect 2022 to be a calmer year for real estate. I don’t know that it will be “normal,” but I certainly expect it to be closer to normal than 2021 has been!
If you have additional questions about buying a home in the new year, don’t hesitate to reach out to me at Wind River Realty at 307-856-3999!
~Olivia