Home sales are projected to hit a 16-year high in 2022. But while this may sound like good news for buyers, demand is still expected to outpace supply throughout 2022 and beyond.
According to the 2022 Housing Forecast report from digital real estate listing platform Realtor.com, the tight housing market is partly driven by the growing number of millennials who will reach the prime age range (26 to 35) to purchase their first home next year. This, as well as the trend toward remote work and other factors, could keep the competition for homes fierce.
Rising rent, employment may help boost housing
Among the myriad of shifts expected to impact the housing market are rent prices, which are projected to grow by 7.1% over the next 12 months. This could make it cheaper to own a home than to rent in many cases.
Employment rates are also expected to increase by the end of 2021, and consequently, incomes are projected to grow by 3.3%.
And although new construction is expected to increase slightly, it still lags behind its typical pace, with newly built homes at roughly half their usual share of the overall market, according to the report.
Another factor that could further impact the homebuying landscape is the ongoing shift toward remote and freelance work. As the workforce gains more opportunities to relocate to remote areas where housing markets are less competitive and more affordable, first-time homeownership could be more feasible for millennials and others.
According to Realtor.com, homebuying interest has already been moving away from urban metro areas and toward suburban areas, with viewers of suburban home listings rising by 42.1% since the onset of the COVID-19 pandemic.
Here are some areas of the U.S. where year-over-year market trends are projected to be especially significant moving forward:
- Home prices are expected to grow most in Portland-South Portland, Maine, (10%), followed by Providence-Warwick, R.I./Mass. (9.5%), and Boise, Idaho (7.9%).
- Home prices are expected to grow the least in urban Honolulu, Hawaii (0.2%), Hartford West/East, Conn. (0.7%) and New Haven-Milford, Conn. (1.0%).
- Home sales are expected to grow most in Salt Lake City, Utah (15.2%), followed by Indianapolis-Carmel-Anderson, Ind. (14.8%) and Columbus, Ohio (13.7%).
- Home sales are expected to decrease most in Cape Coral-Fort Myers, Fla. (-5.6%), San Francisco-Oakland-Hayward, Calf. (-5.2%) and Bakersfield, Calif. (-4.2%).
Buyers beware of tough competition
Supply issues aren't the only problem that buyers will face in 2022. With the coming year expected to bring increases in both listing prices and mortgage rates, purchasing a home could become even more expensive.
Even as a historically large segment of Americans feel it’s the wrong time to buy a house, demand is still expected to rise. That means homes may continue to sell quickly, and buyers should be prepared to make fast decisions whether to bid on a property and how much to offer the seller.
Caught between stiff competition and bidding wars, how can buyers make sure they get a deal that's both affordable upfront and sustainable in the long run? Realtor.com recommends that buyers take the following steps to avoid getting into financial trouble:
- Review your budget and determine what payment you can afford before you start shopping
- Make a list of "must-haves" versus "nice-to-haves" to help focus your search
- If interest rates increase, make sure to calculate how your monthly payment will change
Methodology: Realtor.com's model-based forecast uses data on the housing market and overall economy to estimate values for variables for the year ahead.