When it comes to the real estate market, we can conclude that the past two years have definitely been leaning towards sellers. After the pandemic spread around the world, people began to buy more houses, which resulted in a drastic rise in prices and a reduction in the number of houses available for purchase. Sellers profited significantly, while buyers witnessed increasingly unfavorable conditions for them in the market. Given the overall situation, people are constantly wondering what is next: will we be able to expect the real estate market to turn into a buyer’s market? Experts believe that the current situation will not change much in 2022, but that the market will lean towards customers slightly more than was the case in 2020 and 2021. The real estate experts at Premier Real Estate in North Carolina feel the market conditions that were present over the past 2 years are starting to plateau and will most likely remain stable throughout the end of this year, and it appears others within the industry are trending in the same direction based on performance over the course of 2021.
Real estate market in 2021
The situation on the real estate market during the past year has been very favorable for sellers. As the global pandemic began to spread, so did the demand for homes. The National Association of Realtors reported that the average national house price reached its highest value of all time, at over $362,000, in the middle of last year.
NAR’s fortieth annual report in a row showed some interesting data on the profile of sellers and buyers of houses. It is estimated that one third of buyers bought their houses at a price that was higher than the one they initially asked for. This clearly indicates that demand was high, as well as that the number of houses available for purchase was quite limited. The number of first-time buyers experienced a big jump compared to 2020 – as much as 3 percent in a year. The average age of first time buyers was 33 years.
As we mentioned, one of the main factors that contributed to the rise in prices during the pandemic last year was the limited real estate offer, but also low mortgage rates. Redfin reports that only 1.3 million homes were available for national sale in the middle of last year. This number is more than 20 percent lower than in June 2020.
Redfin’s chief economist explained why 2021 was very atypical in terms of the real estate market. The demand for houses was really high, especially when it comes to holiday homes. Low mortgage rates, lack of building materials and inequality of wealth are just some of the factors that have contributed to having a seller’s market in 2021. Buyers were willing to pay for the house much more than usual and showed a willingness to buy the house much earlier than planned, to ensure that it did not slip out of their hands. The average number of days it took to sell a house in 2021 was 15, and more than half of the homes were bought within two weeks, which shows that the sellers were really lucky in the year behind us.
Predictions for real estate in 2022
Although it is difficult to make clear predictions, experts believe that the real estate market will stabilize by the end of this year and will be more customer-friendly than it has been in the past two years. However, keep in mind that we will still have a seller’s market. Prices will be high, interest rates will rise, and the supply of houses will be slightly higher than in the recent past.
Redfin and Realtor.com predict that the 30-year fixed mortgage rate will increase by 0.3 percent compared to 2021 and reach a value of 3.60 percent by the end of the year. However, Skylar Olsen, chief economist at Tomo (home buying app), believes that this is not necessarily a bad thing from the point of view of customers. Since it will not be possible to make a lot of money, the number of speculative buyers will tend to decrease, which means that the offer will be higher for those buyers who are really looking for a home where they can live.
However, Olsen also notes that millennials will be at a significant disadvantage when it comes to buying their first home, compared to older generations. Houses are now much more expensive than they were before, so they will probably need financial help from family and friends, and also, on the one hand, limit the number of those to whom the option of buying a house will be available at all.
Even before the pandemic, the housing stock was quite low, and the lack of construction materials and increased demand over the past two years only contributed to the current situation.
Zillow research has shown that more house sales are expected than at the end of 2021, especially in the spring and summer, but that the stock of houses will not be enough to meet the increased demand. Zillow’s housing outlook estimates that this feature will be the main determinant for the real estate market in the year ahead of us.
Redfin points out that we should be aware that the real estate market is not predictable this year, just as we did not know what exactly we could expect from it in the past two years. However, what is known is that we cannot expect the market to be a buyer’s market, but it is certain that there will be more balance and that price growth will be much slower than before.
At the beginning of the year, a large number of available houses are expected to be purchased, until mortgage rates increase. After that, it is expected that the stock of houses will be depleted, which will change in the second half of the year, when new construction will increase due to great needs.
Due to the global pandemic, in the previous two years we had a very atypical real estate market. House prices have risen sharply, there has been a shortage of building materials, and house supply has been shrinking. Simply put – the market was leaning towards sellers. As for the market prediction for the year ahead, we cannot expect the situation to change drastically, but more balance is definitely expected. Prices will not grow as much, and it is estimated that supply will increase in the second half of the year due to new construction due to increased needs. However, all these are just predictions, and it remains to see the real situation in the months ahead.