Hazel Emlen

By Hazel Emlen

As we roll into the new year, one of the hottest topics nationwide continues to be the real estate market. It’s no surprise since 2020 and 2021 proved to be record-breaking years for real estate! Most people in the industry have been the busiest they’ve ever been.

In describing the last two years, the word that comes to mind is ruthless. This market has been going what seems to be 100 mph! It has really been the perfect storm with extremely low inventory in markets across the country and demand unlike anything that we had seen before. But the question is, “Will 2022 be the same market as the last two years?” The short answer to this question is yes and no.

Here are 3 reasons why I think we should expect some changes to the real estate market in 2022.

©Nora Carol Photography – Getty Images

1. Interest rates: Interest rates are expected to climb this year. We have been blessed the last couple of years with interest rates floating, for the most part, in the 2% range. The low interest rates were a major contributing factor to the real estate craze that we saw in 2020 and 2021. One key takeaway for buyers to understand is that interest rates will rise this year.

Dr. Lawrence Yun, the National Association of REALTORS® chief economist, expects that the 30-year fixed mortgage rate will increase to 3.5% by the end of 2022 as the Fed raises interest rates to control inflation. Those buyers who have been considering purchasing a home this year might want to consider doing it sooner than later. Although the increase in rates will still leave them at historic lows, the rate hike could affect the purchasing power of some
buyers.

Another thing buyers will want to keep in mind if they are in the process of buying new construction with a completion date of months down the line, is that the rate they were quoted initially could be different when they are able to lock in loan closer to the closing date. For most lenders, that optimal period to lock in is usually 30 days out from the closing date. So advise your buyers to keep in frequent contact with their lender on where rates are at as you go, since rates will be changing.

2. Inventory: Inventory continues to remain at historic lows. The demand to purchase a home is still very high compared to the amount of inventory that is on the market. It’s expected that 2022 will once again remain a sellers’ market.

Those who have considered selling their homes might want to consider getting all of their ducks in a row now to capitalize on the market we are headed into. Although sellers will maintain the upper hand, sellers want to keep in mind that this market is much different than it was two years ago. I think it’s important for the listing agent to set realistic expectations with sellers on what to expect this year. Our country is dealing with several forces at hand, including the ever-present coronavirus with the spread of the new Omicron variant.

The market that we are in is not expected to be like the ones we have seen for the last couple of years. The chances for multiple offers are still likely, but the odds of getting an offer with those insane terms we were seeing (i.e., thousands over the asking price, no contingencies, etc.) is less likely. Pricing is going to be key in this market.

The other side of this is for buyers—they should understand that inventory will remain low, but it is expected to slightly increase. This will be beneficial to buyers as they will not be facing the same amount of competition that we had been seeing over the past two years. First-time buyers and VA buyers can rest assured that they will be able to find success in this new market.

3. Prices: When I describe how pricing has been in the real estate market over the last couple of years, use the analogy of being on a rollercoaster that has been going up and up, and we haven’t gone down the other side yet. The hard truth is that prices are not expected to go down. We are still at the top of that hill due to the demand we are still seeing. For all those buyers who have been waiting on the sidelines for the market prices to drop, they have missed out on the opportunity for some pretty sweet equity. Prices are expected to climb still in 2022 but at a much slower pace than we have been seeing over the last two years. Experts expect price increases somewhere between 5% and 7% for 2022.

While there is no expectation of prices coming down, interest rates will play a major part in buyers’ decision to purchase this year. For a buyer who is rate conscious, they will want to consider buying as early as they can in 2022. Their purchase price power will be impacted not only by the increase in demand in the market, but by the rate that they’re are able to lock in.

All in all, the 2022 real estate market is expected to be another great year! There will be some changes compared to the years past that will be overall good for both buyers and sellers. Share this information with specifics about your market for your potential clients. Overall, 2022 will bring in a nice breath of fresh air for the industry.

Hazel Emlen is a real estate agent with Rapisarda Real Estate in Vacaville, Calif. In 2021, she was named a REALTOR® Magazine 30 Under 30 honoree. Hazel has a passion for selling residential real estate. Her love for helping people achieve their homeownership dreams is what continues to feed her love for the industry. With six years of experience under her belt, Hazel is in the top 1% of agents in Solano County. In her spare time, Hazel also enjoys hosting her own podcast, “Real Life & Real Estate.”