The 2021 Recap
The last 22 months have been some of the wildest in real estate history, as the COVID-19 pandemic accelerated the speed and intensity of recent trends in Florida and all around the country.
Home prices surged to record-breaking highs. Interest rates dropped to historic lows. On top of that, we saw serious labor shortages and everything from inflation to supply chain issues further affecting the 2021 housing market. This became the perfect storm for sellers and a daunting prospective for homebuyers making it increasingly difficult for younger buyers to purchase their first home.
The 2022 Forecast
We all know that no one can predict what the next year will bring, but here’s what industry experts are saying. Home prices are expected to continue to rise, though at a slower rate than last year. As a result, the 2022 housing market will continue to present challenges for new buyers looking to make their real estate purchase.
For those looking to sell, existing homeowners will likely have another year to capitalize on equity. Or, if not interested in selling, take advantage of rising property values and refinance — if they haven’t already. I would recommend refinancing sooner rather than later as interest rates are said to increase in 2022.
Experts also predict two major 2021 trends: low housing inventory and supply chain issues, both of which will continue to be the major obstacle and challenge for construction and renovations.
What to expect in 2022
Two major topics we’ve been talking about that is said to hit the scene in 2022 is inflation and rising interest rates. Chief economist the National Association of Home Builders, Robert Dietz, said, “For a homebuyer, 2022 is going to require patience and strategy,”
One thing we heard a lot of in 2020 and 2021 were buyers waiting for the market to crash or slow down.
In a recent CNET article, Karan Kaul, senior research associate at the Urban Institute, cautioned buyers saying, “If you think you’re going to wait on the sidelines for the market to cool off, that usually doesn’t work. “Timing” the market is a tricky enterprise, and prices seem unlikely to decrease meaningfully any time soon.”
Combined with historically low interest rates, a record-breaking number of homeowners were able to tap into their home equity in 2020. As property values surged during the first year of the pandemic, cash-out refinancing levels were at their highest since the 2007 financial crisis.
We’ve seen how this increase in equity for homeowners has become a difficult situation for homebuyers even with the low interest rates, but unfortunately the pricing doesn’t look like it’ll change much in 2022, but interest rates will, making it even costlier for buyers in 2022.
Construction delays and soaring prices
As stated in CNET, “Supply chain disruptions caused by the COVID-19 pandemic continue to delay shipments which impedes new construction. That is only making the market that much more competitive along with the rising price of existing homes across the US. And the number of people looking to buy is also increasing, thanks in large part to millennials entering the housing market in growing numbers.”
Buyers are hitting in the market in droves and even with those willing to wait, there are still plenty out there, including cash investors, that are still flooding the market and surpassing the supply of inventory available.
Additional challenges for new construction, which typically alleviates inventory issues in the real estate market, include a lack of building materials, higher cost of building materials like lumber, appliances, windows and doors, and even garage doors. Further complicating the picture is a sustained labor shortage, particularly for skilled construction workers.
It’s clear that demand will continue to outweigh supply for some time to come. We continue to hear we are 3-5 years behind in construction.
Something to watch for
The Federal Reserve announced that it will wind down bond purchasing and look to raise interest rates next year. Higher interest rates will only make things more difficult for those looking to buy, as they raise both the average monthly payment and the total lifetime cost of a mortgage.
For more questions on the real estate market in Central Florida or to SELL or BUY in Orlando, Oviedo or surrounding areas, contact us at 407.801.9914.
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