Historically, the real estate market slows down over the winter months and prices level off or sometimes go down. This is not the case this year. The 2021 real estate market was a record-breaking year. It is predicted to go from a record-breaking market to a hot market in 2022. Danielle Hale, Realtor.com chief economist states, "We expect a whirlwind 2022 for the housing market. Home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs." It is already happening, especially in the hot markets.
The Housing Market Bubble Will Not Burst
According to an article, Will the U.S. Housing Market Crash in 2022? and data from Freddie Mac, low interest rates and limited availability of homes in desired areas led to an overall increase of home prices of 11.3% in 2020 and 16.9% in 2021. This is why the housing bubble will not burst, and the housing market will not crash. The United States housing market will continue to struggle with a low inventory of homes available for sale in 2022. Long-term mortgage financing is economical. So, if the market begins to drop, there are plenty of first-time homebuyers and buyers looking to upgrade to more expensive and larger homes that will step in.
2022 Home Buyers and Hot Markets
The home buyers in 2022 will be made up of quite a few millennials who are reaching the homebuying age. They are paying off student loans and credit card debt and are taking advantage of the low mortgage interest rates. Investors are also taking advantage of the low interest rates as it is an inexpensive way to buy money right now. There are also a significant amount people who are reaching retirement age and are moving to the sunbelt areas. According to a recent article, The 10 Hottest Housing Markets for 2022, According to Zillow, in the U.S. for buying homes are:
1. Tampa, FL
2. Jacksonville, FL
3. Raleigh, NC
4. San Antonio, TX
5. Charlotte, NC
6. Nashville, TN
7. Atlanta, GA
8. Phoenix, AZ
9. Orlando, FL
10. Austin, TX
The article states, "Zillow says these markets will have strong home value growth this year, high job growth, fast-moving inventory and a large pool of likely homebuyers."
We are already seeing a rise in the mortgage interest rates. The reasons are many including inflation, stock market volatility and the 'crisis' with Russia threatening to invade the Ukraine. Daryl Fairweather, Redfin chief economist, says, "I expect mortgage rates to slowly rise to 3.6% by the end of 2022." D. Lawrence Yun, the chief economist at the National Association of Realtors (NAR), forecasts the 30-year fixed mortgage rates to increase to 3.5% by the end of 2022. (Marketwatch.com is a great resource for mortgage interest rate predictions.)
The current inflation trend is affecting the real estate market right now. An article on Realtor.com, Here's How Inflation Is Affecting Home Prices: What Buyers and Sellers Need To Know Right Now confirms Americans are paying more for just about everything including gas, utilities, groceries, appliances and more. Real estate is historically an "investment safe-haven" during inflationary periods. The rising home values are offsetting rising prices in the economy.
We continue to see home values rise in this winter market. Even though interest rates are rising a bit and inflation is occurring, real estate continues to be a sound investment.