In 2020 and 2021, the housing market saw some unusual activity, prices, and demand. So much so that many homebuyers taking advantage of record-low rates were simply priced out of the bidding war. In some cases, individuals and families chose to rent instead of buy due to a lack of affordable inventory. However, with 2022 right around the corner, homebuyers now want to know if the new year will usher in a more stable housing market. Join us below to discuss some of the critical housing and rental market predictions for the upcoming months.
Housing Market Outlook for 2021 and 2022
In general, Fall and Winter are relatively slow times in the real estate and rental market. During the pandemic, rates fell, and more and more people sought to take advantage of these record-low rates. However, with not enough homes on the market to keep pace with demand, prices soared. Often houses would fly off the market with multiple offers in mere days. In addition, slowed or even halted new construction projects only added to the shortages.
At the height of the pandemic, single-family home inventory was around a 2.5-month supply. However, this has steadily increased throughout the end of the summer. The supply rate jumped to 5.5 months in May of 2021 and 6.3 months in June. As of October, homes were on the market an average of 45 days which has slowly increased. That said, property is still selling fast, considering that 45 days is faster than in the previous two years.
However, a balancing market does not mean a slow market by any means. In fact, prices continue to linger at higher-than-normal rates, which still force some buyers out of the race. This, along with competitive bidding and smaller inventory, has led many homebuyers to reconsider the benefits of renting – at least for now.
What’s Next for the Housing Market?
Although predictions vary, most experts agree that 2022 will see continued “normalization” or market balance. However, with price growth expected to slow heading into 2022, other factors will be essential to consider.
- Seasonality – The pandemic was an anomaly no one saw coming. However, as life returns to normal, so do the seasonal cycles of the real estate market. As a result, albeit slowly, inventory is back on the rise during this Fall and Winter season.
- Employment Changes – Working from home allowed many buyers and renters to steer clear of the cities in favor of the suburbs. That said, if companies decide to return employees to the office, it may shift some of the population back to urban areas. Thus, changing some of the inventory and price dynamics in these areas.
- Inflation and Rates – Currently, high inflation means that the Federal Reserve will likely increase interest rates, and in turn, mortgage rates. Experts estimate that the current average 30-year rate of just over 3% could climb over 4% in 2022.
Estimates and both housing and rental market predictions vary depending on who you talk to. For example, no one could have predicted just how much the market would change during the pandemic. So, entering a new year as life returns to typical demands that buyers be vigilant. Moreover, national predictions and trends do not always translate to every smaller market. In fact, each state, county, and neighborhood has its own unique factors that determine demand and pricing.
Should You Wait Out a Hot Real Estate Market?
While homeownership is still the American dream, circumstances make it out of reach for many. When the market is up, the competition and prices can be fierce. As a result, some homebuyers choose to wait. So, let’s review some tips and advice for navigating a calming but still sizzling market.
- Avoid Pressure Decisions – Homes may be flying off the market all around you, but that does not mean they are all great deals. Homebuyers should never give in to the pressure to buy just to “have something.” If the home is not right, keep looking, or you may end up in a house full of regret.
- Know Your Target Area – As we mentioned, not all national trends translate to the local market. So, buyers must be in tune with the trends and demands where they are looking to buy. Not doing so may result in missing a critical window of opportunity.
- Make Sure You’re Ready – Purchasing a home in any market is a substantial financial commitment. Although the frenzy to buy may be at a peak, that does not mean this is the time for everyone. So, whether the market is hot or cold, make sure you are financially prepared to make the leap to homeownership and work with a reputable lender to get preapproval before beginning your search.
In some ways, waiting is always a gamble. However, buying a home is a significant financial and emotional purchase. While rates, prices, demand, and inventory are guaranteed to fluctuate over time, buyers need to be vigilant to make their move at just the right time.
Is Renting the Better Option in 2022
Deciding to buy or rent a home involves many other more minor decisions. Individuals and families must evaluate their goals, desired location, budget, and priorities when determining their housing options. Looking forward to 2022, rental market predictions echo the effects of a turbulent year in the real estate industry. With so many uncertainties in the housing market, renting has become an attractive option.
Low home inventory and higher prices have made the home buying process a cutthroat business. While the market shows signs of balancing, circumstances right now still favor sellers over buyers. Renting is an excellent option for buyers who aren’t interested in overpaying for the few houses on the market. Plus, with prices at nearly record highs, renting can save money while buyers plot their next move.
Unlike the housing market, rental market predictions show that prices will remain more stable at the beginning of 2022. While prices did go up during the pandemic at a rate of around 4.5%, it was not as dramatic as home prices.
With so many people dealing with the pandemic’s job and income uncertainty, renting offers much more flexibility than a mortgage. In 2020, Entrata did a study that showed 16% of renters decided to renew a lease instead of buying a home. Meanwhile, many others chose to move to a cheaper apartment to cut costs. However, a homeowner cannot quickly move to lessen a high mortgage payment.
Reasons to Consider Renting Over Buying
- Try Before You Buy – By renting an apartment in the area, you eventually want to buy in allows individuals to try things out. In addition, renters get to see what a place is like day to day without a high level of commitment. After all, everything from traffic congestion to amenities and outdoor parks can influence a homebuyer’s decision. Thus, by renting first, if the area is not quite what you thought, moving is still an option.
- Landlord Incentives – As renters vacated downtown in favor of the suburbs, many landlords offered incentives to increase occupancy. Whether it is a reduced rate, free amenity, flexible term, or waived fees, renters can still benefit from these move-in specials in many metropolitan areas. However, as rental market predictions indicate a growing demand for rentals, these specials may not last long!
- Save on Maintenance – Nothing is worse than moving into a new home only to have the furnace break down or find out that the roof really does leak. As a homeowner, this financial responsibility is solely on your shoulders. However, renters have an advantage that maintenance costs like these fall on the landlord. Even minor repairs can severely impact a tight budget, so renters have the upper hand in saving on maintenance costs and even utilities.
How to Rent with Confidence
Finding the ideal home to buy or rent takes some due diligence. Although renting is not the same level of commitment, renters still sign a contract of typically 12 months. As rental market predictions continue to say the demand will increase, now is the time to secure your next home. It is best to seek out a reputable property management company with transparent fees and processes to shop rental listings with confidence.
At Bay Property Management Group, we offer up-to-date listings to suit a variety of needs and budgets. In addition, our dedicated leasing staff works with you every step of the way so you can feel confident in your home choice. For more information or to see our available listings in your area, check us out online today.