It’s no secret that U.S. homebuyers had a tough time in 2021. Tight inventory commissions and rapidly rising prices have challenged buyers across the country. Now that we are nearing fall 2021, many are wondering whether relief is in sight.
This begs the question: will the housing market for home buyers be better in 2022?
Recent reports have offered a glimmer of hope to buyers in the US. These reports have shown an increase in the number of homes for sale along with a general cooling trend in the housing market. If these trends continue, the real estate market for homebuyers could be better in 2022.
Real Estate Market Better For Home Buyers In 2022?
More inventory to choose from, a slower pace, and moderate price growth. These are just three of the reasons the housing market could be better for home buyers in 2022.
1. There may be more properties to choose from.
In early September Realtor.com published a property market report for the whole country and the 50 largest metropolitan areas. This report showed that more properties have come on the market in the past few weeks.
According to Realtor.com, new property listings rose around 5% year over year in August 2021. In some major cities, such as Cleveland and Columbus, new entries rose more than 20%.
This is one of several recent reports that have shown an increase in the housing market stock. If this trend continues through the rest of the year, the housing market for home buyers could improve significantly in 2022.
Related: Supply growth could change the market
According to Danielle Hale, Chief Economist at Realtor.com:
“This month, new sellers launched more affordable entry-level homes year over year, while others began adjusting list prices to better compete with an increase in inventory.”
2. The real estate market could cool down a bit next year.
Several recent reports have shown that the housing market is cooling somewhat compared to the overheated frenzy in late 2020 and early 2021.
One of those reports came from Redfin, a national real estate agent. The company reported a 6% decrease in home sales in August 2021 compared to the same month last year.
Similarly, the National Association of Realtors reported a measurable decline in pending home sales during the summer months.
These and other indicators suggest that the real estate market may cool down a bit. High prices could be a reason for the decline in sales. Property prices have risen steadily across the country over the past year, displacing some buyers from the market. This has reduced demand across the board, resulting in fewer sales.
If this general cooling trend continues, the housing market for home buyers could be better in 2022. We may not see real estate activity as “frenzied” as in previous months next year. The real estate market could move a little more slowly. This would reduce the pressure on buyers by facilitating competition.
According to Lawrence Yun, Chief Economist for the National Association of Realtors:
“The market may start to cool down a bit, but right now there isn’t enough supply to meet demand from potential buyers. Inventory is slowly increasing and home shoppers should see more options in the coming months. “
3. Home price growth could slow down.
We have seen an insane spike in home prices over the past year. Some of the hottest real estate markets, like Austin and Boise, have seen more than 30% annual price gains. That’s miles above the historical average, which goes back 40 years.
Soaring prices have also made it difficult for home buyers in the US. Many buyers have shut themselves out of the market altogether or are unwilling to get involved in the battle.
The enormous house price increases over the past 12 to 18 months are unsustainable. Real estate values simply cannot rise much longer at this rate. In fact, we are already seeing signs of a slowdown in home appreciation across the country.
Freddie Mac researchers predicted that US house prices would rise more slowly in 2022 than this year. In a forecast released earlier this year, they forecast that U.S. home values would rise around 12.1% in 2021, followed by a more modest increase of 5.3% in 2022.
To quote their report:
“The rapid rise in property prices could exhaust potential home buyers. We have seen signs of declining demand in recent home purchase mortgage application data. “
In some real estate markets, home prices could even level off in 2022. This is another reason the housing market could be better for homebuyers in 2022. Slower price growth would allow more buyers to enter the market and find suitable property within budget.
Disclaimer: This report contains predictions and projections related to real estate. Such views are an educated guess and should be treated as such.