It's no secret that the housing market has been surprise for many with the pandemic as a backdrop. A drop in nterest rates and the greater flexibility afforded by working from home enabled more first-time buyers to realize their dreams of homeownership. On the other hand, rising housing prices and scarce inventory made it difficult for many to get the home they wanted.
Predictions for 2022
While no one can say for certainty how the housing market will be in 2022, there are indications that home prices should level out somewhat. This is in spite of predictions that demand will continue to be strong due to the fact that many millennials are nearing the age when they are likely to want to become homeowners for the first time.
Inflation is a concern for the federal government. This could lead to higher interest rates as the Fed attempts to temper its growth.
Increasing interest rates mean that potential home buyers could see their purchasing power shrink. Those who have been banking on low interest rates in order to help them buy a home in the near future might want to accelerate that process in order to lock in savings now.
Gains in Home Prices Could Slow
Between August 2020 and August 2021, home prices jumped more than 18 percent. This was the biggest annual increase in at least 45 years. Even though home values might not fall much in 2022, gains in this area could begin to slow down.
Instead of seeing home prices continuing to increase by as much as 18 percent in 2022, the market could be looking at an average appreciation of around 5 percent. This figure is more aligned with the price appreciation rates the market has seen over the last two decades.
Because home prices are not expected to drop and interest rates could increase -- especially if demand and inflation concerns continue -- the time to purchase a home is now. Doing so enables home buyers to take advantage of low rates.
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