Is The Housing Market Going To Crash?

Will the market continue to heat up, or will it cool off? Here are expert predictions for the 2022 home market and real estate trends to watch.

The combination of historically low mortgage rates and a large number of individuals working from home as a result of the epidemic fueled the housing market this year. According to a RedFin research, demand was strong and supply was limited, resulting in a hyper-competitive market in which more than half (54 percent) of properties sold over list price.

“Home sales and price appreciation accelerated dramatically, nearly independent of location since the strong housing market fundamentals before the pandemic were boosted by low mortgage rates and high savings rates,” says Skylar Olsen, chief economist at digital homebuying platform Tomo. However, will the market remain hot till 2022?

Competition seems to have slowed slightly—RedFin stated that competition on proposals prepared by its agents touched a year-low in August, dropping from over 74 percent in April 2021 (a record high) to 58 percent. “Anticipate significantly less competitive pressure, but don’t expect prices to fall very soon,” Olsen predicts.

Here’s what experts anticipate regarding the potential of a market meltdown in 2022, as well as housing market trends to look out for in the next year.

It is unlikely the housing market is going to crash in 2022.

While no one can tell for certain, the indications do not point to a major housing catastrophe in 2022. “Population demographics, a decade-long lack of new construction houses, and the status of the United States economy are all existing variables that will prevent a housing crisis from happening in the near future,” says Chuck Vander Stelt, an Indiana-based real estate agent. Vander Stelt believes that the circumstances that cause a collision are not present and will not be for some time. “There are far too many individuals coming of age, and probably those who are already there, who wish to live on their own,” he says.

According to Fannie Mae’s most recent predictions, 6.8 million new and existing houses will be sold by the end of 2021. Next year may see more of the same in terms of demand and price hikes. “While we don’t have a crystal ball,” says Sherry Chris, president, and CEO of Better Homes and Gardens Real Estate, “2022 may look a lot like this year and be driven again by the supply vs. demand dynamic.” “Fannie Mae forecasts 5.6 million existing house sales in 2022, a little reduction but a 13% rise in new home sales to 893,000. Home prices are projected to grow as well “Chris says.

According to Chris, another aspect contributing to the market’s resilience is that the majority of homeowners have positive equity in their houses. “According to Attom Data Solutions, people who sold their property in the first quarter of 2021 earned an average of $94,500, or a 44.9 percent return on their initial purchase,” she adds. “We can expect people to buy more homes not less” states Dom, president, and CEO of Credit Cadabra.

According to Nik Shah, CEO of House.LLC, a firm that offers down payment help to home purchasers, tighter lending rules at banks have raised home equity. “Homeowners have more equity in their houses than at any other moment in the previous 30 years,” Shah adds. “The danger of oversupply as a result of defaults is quite minimal.”

Housing Market Crash Info

Inventory levels are expected to stay low.

One of the primary reasons for the low chance of a housing catastrophe in 2022 is a continuing shortage of inventory. “There are just not enough properties for sale in the property market,” adds Shah. He claims that notwithstanding a minor uptick in recent months, housing inventory remains very low, particularly when compared to historical patterns.

“According to Freddie Mac experts, we are about four million houses short of fulfilling need and demand,” says Christopher Totaro, a real estate agent with Warburg Realty in New York. Totaro cites supply chain and labor scarcity difficulties as important real estate challenges. “Those issues make a big rise in inventories less probable,” he argues.

With little availability pushing up property prices (and demand), a rise in mortgage rates might stifle the market. “Rates are expected to climb to 4% by the end of 2022, according to Freddie Mac and others. While not particularly large by historical standards, the rise is likely to lower the number of prospective purchasers “explains Chris She believes that if mortgage rates rise, prices would stabilize and there will be fewer multiple-bid proposals.

According to Olsen, property values will decline through 2022, but prices will continue to rise. “Price rise will continue to be more rapid than ‘normal’ times until we witness a quicker surge in homeowners having to sell their house to avoid foreclosure amid increasing mortgage rates,” Olsen predicts.

More millennials are anticipated to own houses.

Many millennials joined the labor force for the first time last year, and much more are expected to do so in 2022. “This age group is the driving force behind the home market in the United States,” adds Vander Stelt. He claims that by purchasing their first houses, millennials contribute to the housing market’s bottom. “This will keep the housing market in the United States highly excited for the next many years,” he predicts.

While millennials may be the generation to monitor in the property market, Boomers may also be worth watching as real estate prices continue to rise. “They’ve probably made considerable financial gains on their properties over the years, and it’ll be fascinating to watch whether they start moving again now that we’re hoping over the worst of the epidemic,” Chris adds. According to U.S. census statistics, boomers continue to account for the lion’s share of the housing market, accounting for 75% of all home purchases. If you enjoyed this blog you might like our recent post What Makes Buying A Foreclosed Property Risky?

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Oliver Moore