Why waiting until next year isn't a good strategy for frustrated homebuyers.
Though it has lost some of its thunder, the COVID-19 real estate boom continues to reverberate across the U.S.
Thanks to historically low mortgage rates and other factors, home prices have been driven to levels many first-time buyers can't afford. In June, the median price of a previously owned home in the U.S. reached $363,300 — up an incredible 23.4% from a year earlier, according to the National Association of Realtors, or NAR.
But home sales have calmed down somewhat: They fell for four consecutive months before rising a modest 1.4% in June.
Some would-be buyers may be thinking America's housing frenzy will exhaust itself and make 2022 a more opportune time to get into the market. Don't count on it. Will buying a home be easier in 2022?
Whether during a pandemic and accompanying economic crisis or in a more ho-hum year, real estate prices are driven by three factors: interest rates, housing supply and consumer demand. Change even one of those to a significant degree and you’ll see local housing prices react.
The question is whether the elements will shift in 2022 — to a great enough extent, and in the right direction — to make finding affordable properties more likely for first-time homebuyers.
The answer? Probably not, and here are three reasons why. 1. Interest rates will be higher next year today's cheap mortgage rates aren’t expected to last. The Mortgage Bankers Association's most recent forecast sees the 30-year fixed rate averaging 3.4% during the fourth quarter of this year — meaning higher rates are coming. By the end of 2022, the MBA expects the 30-year to average 4.3%. 2. Housing supplies will still be tight in 2022
One reason home prices have been blasted into the stratosphere is a lack of properties for buyers to choose from. Resulting bidding wars have seen buyers pay far more than what historical data suggests their homes are worth.
Each time a "sold over asking" sign pops up on a lawn, it helps establish the next seller's listing price, ensuring the cycle continues. And that’s not likely to change in 2022.
3. Demand will stay strong
The problem with a bidding war between 20 homebuyers is that once the dust settles, 19 of them still need houses.
A slew of new buyers will hope to get onto the property ladder next year, in addition to all the lingering buyers whose dreams of homeownership were thwarted this year.