None of us anticipated a pandemic that would wreck almost every aspect of our lives, personal or career-wise. In the same vein, a lot of industries were greatly affected by the Coronavirus disease.
The sudden shutdown of establishments sent a lot of businesses spiraling down, many closed forever. For those who kept afloat, every day seems like a battle.
As the world is halfway to 2021 now, the question posted on every aspiring homebuyer's mind is, would the housing market be favorable in 2022? Let us find out more about what to expect next year in the real estate industry.
1. Mortgage Rates Will Remain Relatively Low
Although the Coronavirus pandemic has significantly affected almost all industries, the residential real estate market continues to be strong. Thanks to the all-time low mortgage rate since the 70s, this sector is quick to bounce from the initial economic effect of the pandemic.
The decrease in mortgage rates back in 2020, dropping the monthly payments of housing loans to 12 percent. This allowed a lot of potential homeowners, particularly millennials, to enter the housing market sooner than expected.
As of date, the fixed rate for a 30-year mortgage is still at .97 percent. For a 15-year fixed plan, it stays at 2.32 percent. Thus, whether you plan on purchasing a new home or refinancing your mortgage, the current mortgage rates are very tempting.
Apart from the low mortgage rates, a number of individuals and families thought of heading towards the suburbs. Rather than renting out tiny apartments in the city, plenty moved and are moving into single-family homes. In essence, if you think about it, the demand for housing is steadily increasing.
2. Inventory Shortage
Since the demand for housing is continually increasing, 2022 is predicted to remain a seller's market. A seller's market occurs when the demand for real estate properties exceeds the housing inventory supply. The opposite of the same is a buyer's market. This occurs when the inventory supply for housing surpasses the demand of the market.
During the outbreak of COVID-19, the real estate industry suffered a halt in operation along with other businesses from other sectors. Nonetheless, it eventually picked up its pace significantly due to the decrease in mortgage rates.
As mentioned, the pandemic drove several organizations to consider remote work setups. In turn, this led to plenty of individuals and families reconsidering their living conditions and opt to move to more desirable areas, such as the suburbs.
A number of families have relocated to suburban areas amid the pandemic not only for financial reasons, but also to fulfill the lifelong American dream of owning a home.
It is to be noted that as of December 2020, there were only 1.07 million units in the inventory. To sum it up, it could only provide a 1.9-month worth of housing supply. According to statistics, there is a 23 percent decline in housing inventory year-over-year.
3. Underbuilding in the Last Few Years
In a nutshell, there are only two types of housing available to homebuyers. It is either newly constructed or existing ones.
Data shows that over the last 10 years, there has been a short supply of newly built homes. With the outbreak of the COVID-19 pandemic, home constructions are even slower not only because of a shortage of labor but also due to an increase in construction materials such as lumber.
According to experts, it is highly unlikely that the construction industry would shift to high gear in order to increase inventory by 2022. It would take more years to do that given that there has been a decade of underbuilding and underinvesting.
4. Homeowners are Afraid to Part with Their Homes
Since newly constructed homes are out of the question, then existing homes might answer for the inventory shortage.
Unfortunately, although there have been more and more existing homes listed in the market, the number is not enough to cover and turn 2022 into a buyer's market.
Based on surveys conducted over the past months, plenty of homeowners are actually disinclined to put their properties for sale. Reading and hearing news about how it is a struggle for homebuyers these days to land properties, only made them worried if they would suffer the same fate.
Not to mention, since there has been a surge of demand and low supply, home prices have been rising in the past few months.
It has been noted the cooling trend with respect to the real estate market of the country. However, experts agree that these current conditions are still not enough to create a buyer's market in 2022.
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