Real Estate Market Trends in 2022

Recently the folks over at Buffini and Company made some bold, but very accurate predictions for 2022. The Federal Reserve Bank has the biggest influence on housing market demand. For those looking to take out a mortgage, interest rates become an important factor in deciding when to purchase. So it’s good to pay attention when the head of the Federal Reserve Bank announces plans for rate hikes. 

  1. Interest rates will go up. Look for the first round of rate increase to happen this upcoming March. There are already whispers in the media that this will happen. Realistically, the amount the Fed is planning to raise the rate will not really affect the market. The Fed is aware that if they raise the rates too high, they will negatively affect markets and with our economy teetering, that wouldn’t be a good move. Unfortunately, if that rate hike is a make-or-break point for a home purchase, it’s recommended to hit the gas and start that home search ASAP. The sooner you can lock in that lower rate, the better. The clock is ticking, so you don’t have much time.
  2. This winter, spring and summer will be very busy for the market (real estate is a hedge against inflation). 2022 will be a Seller’s market. So that means, if you are looking for that HGTV ready property, you’ll need to be prepared to put up a strong offer to compete against the other buyers. For buyers this means having a good amount of cash on-hand to make the offer more appealing to the seller. This could mean offering over the asking-price or adding an escalation clause. If you are offering above the asking price you may spice that offer up even further by covering an appraisal gap. Covering the appraisal gap comes into play when your lender sends out an appraiser to assign a value to the home before deciding to provide a loan. If the property doesn’t appraise to the offer’s purchase price, covering the difference between appraisal value can be very appealing. Some realtors will tell their clients to wave inspections to make the offer more appealing. Other agents feel that they can’t in good conscience do that. Inspections are a critical part in the home purchasing process especially when buying an older property. 
  3. After the 3rd quarter, the combination of inflation and increased rates will force some first time homebuyers to take a step back. Inflation is a real issue affecting many Americans. The increase in costs of goods cannot be ignored especially with the lower and middle class. Expect the market to settle down slightly as first timers are forced out of the game. In a seller’s market, buyer’s need to have a good amount of cash on-hand to compete against those other buyers. Inflation will cut into those buyer’s bank accounts and they just won’t be able to compete. So look for the seller’s market to slow down sometime in the 3rd quarter. It won’t become a buyer’s market just yet, but it will cool. Even if the interest rate is raised an entire percentage point, it’s still going to be a historically good rate and won’t be enough to completely change the dynamic of the market.