By Boyce F. Lowery, CLU®, ChFC®
It’s no secret that the housing market has been historically hot for the last year. During this time, sellers, brokers, and agents have been making money from the increased competition among buyers. All cash offers, sometimes tens of thousands of dollars above asking price, have been par for the course, leaving many to feel overwhelmed by the costs. If this sounds like you, know that you’re not alone. Here are three factors to keep in mind as you navigate the housing market in 2022.
There has been a housing shortage in the U.S. for years, ever since the underbuilding of homes in the wake of the 2008 recession. (1) The sudden desire to move from crowded apartments to single-family homes during the height of the pandemic and the aftermath of COVID has certainly not helped the situation. Between supply chain issues and labor shortages, newly constructed homes are not keeping up with demand, and the number of homes actively listed for sale hit record lows in November 2021. (2)
According to Zillow’s 2022 housing outlook, lack of inventory will be a defining feature of this year’s housing market, (3) and many experts have predicted that the housing shortage will affect the U.S. economy for years to come. (4)
Escalating Housing Costs
With low supply and high demand comes high prices. As inventory remains scarce for both existing homes and new construction, buyers continue to compete against one another, driving prices even higher.
Buyers must endure bidding wars with offers well above asking price in order to remain competitive in the current market. Zillow estimates housing values will rise by 11% over the course of 2022, (5) while the National Association of Realtors expects a 5.7% increase in median home prices. (6)
Increasing Mortgage Rates
Due to the overwhelming increase in inflation (it reached 7.5% in January!), (7) the Fed has signaled it will raise interest rates significantly in 2022. Experts are projecting up to nine rate hikes between March 2022 and March 2023, which is truly unprecedented. (8)
In anticipation of this increase, mortgage rates have already jumped up to 4.05% for the first time since 2019, (9) blowing past initial predictions that rates wouldn’t reach 4% until the fourth quarter of 2022. (10) With so much uncertainty, it’s difficult to predict exactly what rates will look like in the coming months, but it’s safe to say they will continue to increase.
What Does This Mean for Buyers?
Taken as a whole, these factors indicate that first-time homebuyers will continue to have a hard time finding and buying a home while remaining on budget. Not only that, but the exponential increase in housing costs has also caused rent prices to skyrocket as many people are being completely priced out of owning a home. (11) So, what can you do if you’re looking to buy in 2022? Here are some tips for first-time homebuyers and those who already own but would like to move:
- Know what you can afford and know what you’re willing to give up in order to buy a property.
- Make sure your finances are in order, including your down payment and credit report.
- Get preapproved for your mortgage and lock in your rate if you can.
- Explore government programs for first-time homebuyers here.
- Consider other ways of buying property like multigenerational purchases.
How We Can Help
The current housing market is certainly a challenge, especially for first-time homebuyers and those who don’t have a lot of cash on hand to offer upfront. We at Suncrest Advisors will be happy to discuss this or any other financial challenges you may be facing. You may call us toll-free at 888-827-0146 to schedule a time to speak with us.
Boyce Lowery is a 40-year veteran and established expert in the insurance industry. As the managing partner of Suncrest Advisors, he, his partner, and their associates all aim to provide financial security and peace of mind to business owners, executives and professionals, and high net-worth individuals across the United States. Along with more than four decades of experience, Boyce is a Chartered Life Underwriter® (the premier designation for insurance professionals signifying specialized knowledge in life insurance and estate planning) and a Chartered Financial Consultant® (known as the advanced financial planning designation). To learn more, visit https://suncrestadvisors.com/ or connect with Boyce on LinkedIn.