The housing market is in an interesting spot at the moment. Whether or not, it is good or bad will depend on who you ask. Still, there are folks out there who are concerned about where things currently stand.
Look online, and you may find more than a few articles talking about a potential housing market crash. Those headlines are scary enough to send a chill down your spine. They may be giving you flashbacks to a time not too long ago when a real estate market collapse sent shockwaves throughout the economy.
At an individual level, you may be worried about a crash because it could seriously mess with your plans. The last thing you need is a crash dragging down the price of that home you have been improving over the last few years.
It is important to know what you could potentially be up against this year so you can make better decisions within the real estate market. Is a market crash something you need to watch out for? That is only one of the many important questions we will be answering here. Read on and gain a better grasp of the 2022 housing market in the process.
Why a Housing Market Crash Is Unlikely to Happen in 2022
Let’s get to the question at the heart of this article. Should you be worried about the real estate market crashing this year, or is that topic getting more hype than warranted?
It is impossible to speak with certainty on topics like this, but most experts agree that a market crash is highly unlikely. That means you do not need to rush to sell your home. You can still afford to wait things out as you seek out the best offers from your potential buyers.
Of course, you likely want to know why the experts say that a crash is highly unlikely. To help you out, we have highlighted and detailed those reasons in the section below.
Housing Supply Is Expected to Be Limited
One of the main reasons why experts are confident that the real estate market will remain stable this year is the status of the housing supply. There are currently not enough homes available to cause a sudden and unforeseen drop in prices.
Per this article from GoBanking Rates, the supply is so scarce that house prices are projected to increase even if demand drops. If you have a home, you are looking to sell this year, that means you own a highly sought-after commodity.
However, you should avoid waiting too long if you are planning to sell a home. Although supply is low right now, we expect it to change as the year progresses. More homes will hit the market near the mid-point of the year to lower the prices.
You need to stay ahead of that if you are looking to sell this year. Patience can be a virtue for home sellers, but you do not want to overdo that, especially given the current state of the market.
Mortgage Rates Are Expected to Increase
The presence of high housing demand not only connects to a limited supply. Sometimes, people love the idea of buying a home because it is affordable for them to do so.
Many people regard homes as great investments. They will not hesitate to pour their savings into a new property if it is affordable enough.
Thanks to the low-interest rates that became more prevalent during the pandemic, more people suddenly found the prospect of taking out a loan to purchase a new home more palatable. In essence, homes became more affordable because it was easier for buyers to secure the financing they needed.
That was the case for a while, but we expect it to change soon.
Interest rates on loans are already creeping back up again. On top of that, the mortgage rate will nudge up this year.
Simply put, people will spend more if they want to get involved in the real estate market. The low bar of entry is rising; homes will no longer be as affordable as they were, and that should curtail demand.
The scarcity in supply should offset the drop in demand, but do not expect a big change. With those forces working against one another, price fluctuations may not be too big in either direction. All those factors will be working together to mitigate the potential for a market crash.
Interest in the Real Estate Market Will Persist
2021 was a banner year for people selling their homes. The previous year brought an enormous amount of new buyers to the market. Per this article from The Washington Post, 34 percent of the people who bought homes last year were also first-time buyers.
Also, 34 percent is a high number. It even surpasses the impressive 31 percent mark established in 2020.
To say that there the interest level in the real estate market has been high over the last two years would be an understatement. Truthfully, we were witnessing something historic with regards to buyer interest.
Typically, when we see outliers like that, we expect regression to follow shortly. People anticipating a strong regression to the mean could also be the ones fueling speculation that the housing market is bound to crash. After all, there is no way that interest in the real estate market could remain that high, right?
A dip in buyer interest is indeed anticipated, but the degree to which it may fall will likely not be as bad as some people expect. Given the current market factors, many expect the buyer interest to hold to some degree.
For instance, the mortgage rate will likely increase, but it likely will not push the majority of shoppers out of the market. You can also maintain interest as long as more homes reach the market as expected.
First-time buyers may not be as prevalent in 2022 as they were in years past, but they will still be there. Their presence will also be another factor that should stave off a potential housing market crash.
How the Housing Market Is Expected to Develop in 2022
At this point, we have established the reasons why the real estate market is unlikely to crater this year. That should allow you to breathe a sigh of relief. Then again, it also brings up another important question.
If the housing market is unlikely to crash, how exactly will it develop throughout 2022?
Answering that question will be critical whether you are looking to buy or sell some property. The answer to that question can give you valuable guidance as you seek to navigate the market.
Detailed below are some of the projections that the experts have put forth for 2022’s real estate market. Keep them in mind as you plan your next moves.
The Early Market Will Resemble Last Year’s
Early on, projections indicate that the housing market will look a lot like what we saw last year. That means you should expect to see eager buyers, sellers raking in serious profits, and a generally lively market.
The early portion of the year will not be ideal for home buyers. Prices will remain high during that time. They may even increase compared to where they were last year as some trends carry over.
You should also avoid buying during this time because the market may not be full of good options. It could take some time for the influx of homes to arrive, so try to hold off on buying if you can.
Supply and Demand Levels Will Normalize
Once you get through the early part of 2022, you should find a real estate market that is different from what we have seen in recent years. The market that favored sellers heavily should start to become more balanced.
The more balanced market will be fueled by new developments on both sides. You can start with the supply side of things.
Currently, the sellers still have control over the market because supply is limited. With only slim pickings to choose from, the buyers will find themselves in a tight spot.
Experts predict the construction of new homes closer to the middle of the year. Buyers who were too eager when they jumped into the market are likely to start selling off close to that time. The combination of those two trends should enrich the housing market.
Increased housing supply should lead to prices falling considerably. They will not plummet to the ground, but they should remain attainable for a good percentage of buyers.
As for the buyers, that segment of the market may also return to normal as the year progresses. The more onerous rates for loans and mortgages should deplete the population of buyers within the real estate market. We may also see that return to normal before long.
If the projections hold, the real estate market we know should look more normal. The pandemic housing market we are used to may not hang around that much longer.
Housing Prices Will Grow at a Slower Rate
The increase in house prices throughout the pandemic was remarkable, to say the least. Motley Fool termed the spike in housing prices during the pandemic as “astronomical”.
So, what does “astronomical” truly mean in terms of housing prices? The above-mentioned site also has the lowdown on that.
From July 2020 to July 2021, the national median price for houses grew by over 19 percent. An increase like that is rare, and that should clue you into what kind of market sellers have been working with.
Moving forward, experts believe that we will not see that kind of jump in pricing again.
You should not expect to see another double-digit jump in pricing this year. The price increase for houses should be more modest this time around.
On the high-end, experts predict that the median price could increase 6 percent. The low-end projections indicate that the increase will be closer to 2 percent.
How You Should Approach the Housing Market
The current housing market may not be something that you feel comfortable dabbling in. That is perfectly understandable. Even so, you probably do not want to miss out on available opportunities.
How exactly should you approach the market if you want to maximize your assets? That is a tricky question. Still, there are things you can do to tilt the odds in your favor.
Be a Patient Buyer
You need to exercise plenty of patience if you want to buy a home this year. Early on, it will look like your options are drying up. That could end up pressuring you into buying a new home.
Given how they predict 2022 to play out, you should avoid doing that. Partner up with a realtor so you can pinpoint the prime listings, but do not feel pressured to buy because you see the available options dwindling.
Do not Drag Your Feet on Sales
In stark contrast, sellers should seek to act quickly in the current real estate market. That will be key to claiming a large return on investment.
Work quickly to find serious buyers and start making progress on potential sales. Partner with a realtor so they can connect you to those buyers. Get everything you need to make a sale, so you can act quickly if an interested buyer comes around.
If you cannot sell your property quickly, you do not need to settle for low offers. You can still wait until prices normalize again before selling. That will take some time, but it is better than accepting a bad deal.
The sky-high prices that are floating around in the current real estate market may lead you to believe that a crash is coming soon. Thankfully, a housing market crash seems highly unlikely at this point.
Although a crash is unlikely, the housing market could still be quite volatile. Work with us at the RI Home Store if you want to navigate that market expertly. We will help you find the best deals available so feel free to contact us today!