Ray: Examining 2022 real estate market trends
After an unprecedented real estate market, next year’s homebuyers can look forward to conditions that are a bit more normal.
Economists are making their predictions for the upcoming year and here are a few of the trends they point to:
Rising home prices but at a slower rate
Instead of the 30% home price spike seen this year, next year’s home buyers can look forward to home prices increasing — but at a slower rate.
That’s the consensus of 22 real estate industry economists who think U.S. home prices will rise a median of 5.7% in 2022, according to a National Association of Realtors survey. Of those 22 economists, only two expected price declines next year while 20 say there will be price increases ranging anywhere from 3.8% to 12%.
For Salt Lake City, Realtor.com is predicting home prices will rise 8.5%. In fact, Realtor.com recently named Salt Lake City as its No. 1 housing market for 2022.
Higher interest rates but still low
Because of high inflation, the Federal Reserve will taper its purchase of mortgage-backed securities faster than originally planned. The program, which was put in place at the beginning of the pandemic, has resulted in the ultra-low mortgage rates over the past year and a half.
After wrapping up its purchases, the Fed has also signaled it will raise short-term interest rates. The consensus forecast of the 22 economists showed a median prediction of two increases next year.
Because of the Fed’s actions and current economic conditions, the National Association of Realtors expects mortgage rates to average 3.5% in 2022 — up from 3% in 2021.
More housing choices
Both Realtor.com and the National Association of Realtors expect housing inventory to expand in 2022. Realtor.com says for-sale inventory will grow an average 0.3% in 2022. More homeowners say they plan on selling, and new construction projects are likely to reach the market — although supply shortages will hold back some construction.
Lawrence Yun, chief economist of the National Association of Realtors, says the end of mortgage forbearance programs along with COVID deaths will result in additional housing inventory.
Continued housing demand
Even though affordability will pose a challenge, especially with rising prices and interest rates, buyer demand and the seller’s market will likely continue next year. For Salt Lake City, Realtor.com is predicting home sales will increase 15.2%.
Utah is also likely to see demand from out-of-state buyers who have the flexibility to work remotely. The work-from-home trend is likely to continue as employers look for ways to attract and retain employees during the labor shortage.
In fact, Realtor.com says one in five homeowners looking to sell no longer need to work close to the office. Thus, suburbs are likely to continue to be a popular location as buyers look for more space.
Demographics are also pointing to a strong year for homebuying. Realtor.com notes that next year the U.S. will have 45 million millennials in the homebuyer sweet spot, ages 26 to 35.
Expansions in real estate tech
Look for continued improvements in virtual tours and other real estate technology to support online house hunters.
For example, improved virtual tours will help buyers narrow down homes before visiting them in person and will provide greater assistance to out-of-state buyers. New 3D tours and the use of artificial intelligence will help buyers quickly find properties that meet their specifications.
To learn more about real estate trends to watch for in 2022, contact a local Realtor. Find one who specializes in your neighborhood by searching the online directory of Northern Wasatch Realtors at NWAOR.com.
Shauna Ray is president of the Northern Wasatch Association of Realtors.