Home prices have climbed rapidly over the last 3 years. So much so, many in the media worry that a housing market crash might be looming.
Is this really a valid fear?
Will the Housing Market Crash In 2022? Nearly all experts say “no”.
Given the increases in value of homes, there are a few in the news media pontificating that a housing market crash is on the horizon.
Experts and the data, however, suggest otherwise. Here are two key factors…
New “Millennial” Buyers
The Millennial demographic makes up a major portion of homebuyers. Most experts believe that next year, they’ll continue to the major players in the national housing market. Many of them will be first time buyers, which will help keep demand for homes robust over the next few years.
Believe it or not, household formations of those ages 27-35 is over double the rate of actual homes being built. There will continue to be a wide gap between the number of homes that need to be built to keep up with demand. This alone is putting pressure on prices which won’t change in the foreseeable future.
Low Inventory
Housing inventory has made things tough for homebuyers as of late. This has been a crucial factor in the rapid rise of home prices over the past year. Although demand among buyers continues to remain strong, existing inventory has not been sufficient to keep up with that demand.
Most industry insiders believe that this situation stay with us in 2022. According to Fannie Mae, a total of 6.8 million new and existing homes are expected to sell by the end of this year. In 2022, about 5.6 million existing homes are expected to be sold, along with 893,000 new home sales.
What Can We Expect in 2022?
According to Zillow, the average price of a home in the US has jumped 19% over the last year. They also predict home prices to increase at a rate of 13.6% over the next 12 months.
As you might remember from your basic economics coursework, the price of anything is based on supply and buyer demand. Over last 2 years, demand among homebuyers has been strong, while housing inventory has been very tight.
Continued Constricted Inventory
While buyer demand remains high, housing inventory is shrinking for the time being. Year-over-year, the number of listed properties decreased 22% compared to 2020. Unfortunately for buyers, seller activity continues to be much slower relative to buyer traffic.
Strong Buyer Demand
Real estate professionals anticipate home buyer demand to remain strong into 2022. In September of 2020, listed homes received an average of 3.4 offers, and by the same month a year later, that number moved up to nearly 4 offers.
These figures suggest that buyer demand has remained fairly strong yet stable, which is expected to be the case moving into 2022.
Mortgage Rates
Low mortgage rates make home buying more affordable. Even though home prices have risen dramatically over the past year, historically low interest rates have still made it achievable for buyers to get into the market.
Over the past three years, mortgage rates have been on a steady decline, though they’ve recently shown a slight uptrend. In the fall of 2018, the rate for a 30-year fixed-rate mortgage peaked at nearly 5%
Today, the rate for the same mortgage type now sits right around 3.375%. This makes a huge difference in the overall cost of a mortgage and monthly mortgage payment amounts.
According to the Mortgage Bankers Association (MBA), the average 30-year fixed-rate mortgage rate will reach 3.7% by the third quarter of 2022, and could hit 4% by the end of the year.
Find Out More
In 2022, most believe that property values will most likely continue to rise, although at a slower rate. With that said, a crash is highly unlikely.
Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s real estate market. It would be my pleasure to help you!
