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Will Homebuyers Catch a Break in 2022?

Posted On Wednesday, 23 February 2022 19:24
Will Homebuyers Catch a Break in 2022?

Homebuyers have had an especially difficult time looking around for and finding houses in the past year. How was the housing market so negatively affected for buyers and is there light at the end of the tunnel in 2022? There are multiple factors that show this year may be more of the same that we have been seeing the past year and a half. The housing market was affected by major events and continues to be coming into this new year. 

The pandemic caused many changes in our economy and the way we live our ordinary lives. With the fear of interacting with others, many businesses were affected, and this was seen in the stock market almost immediately. It plunged incredibly low in March of 2020 and many businesses were affected negatively by the general public’s drastic change in lifestyle. The Federal Reserve made the decision shortly after to lower interest rates to help boost the economy. There were positive and negative effects on the housing market that came out of this decision. Many benefitted and took advantage of the rates, but it was also very difficult for many homebuyers to find and purchase a home due to the incredible demand that followed. 

This demand for houses climbed sharply and soon there were not enough houses available and there were not enough being built, as well. People were in a rush to take advantage of these lower interest rates. Homeowners have been receiving multiple offers and they are benefiting greatly. Many homebuyers have had to put in offers that are above asking price to just be considered for purchasing a home. According to Hippo’s 2021 Homeownership Report, 68% of homeowners paid above the original asking price. 

These rates are not expected to stay low forever, and some are predicting that the Federal Reserve will hike up the interest rates in the following months to help curb the severe inflation we are experiencing as of late. In January, the Federal Reserve Chair, Jerome Powell stated that interest rates may rise in March. This would aid in lowering inflation because the demand should fall and help stabilize the economy. The negative side of this would be that homebuyers that had difficulty bidding for a house will now have to experience dealing with higher rates in the event of finding a home. It is likely that demand for houses will not fall rapidly any time soon, so the added spike in interest rates will only make the experience of buying a home more miserable for the foreseeable future. 

Another reason that finding a home has been difficult lately is that following the start of the pandemic, supply decreased, and the workforce has diminished significantly. These trends have affected the economy in that not enough houses are being built. This creates a high demand for the houses that are available and this in turn increases prices on material and the homes themselves. Building houses is a slower process due to these reasons and there are just not enough available ones to meet demand. Although more supply has recently become available, houses will continue to be in high demand for the next few months due to so much time having passed without a good inventory of them. 

Another factor that is affecting homebuying this year is the expected increase in their value. Home prices are also expected to rise slowly this year, according to Realtor.com and Redfin. The high demand in supply is causing an increase in prices for supply and work. The added interest rates that are coming can only make the prices of homes increase this year, making the year 2022 another year of difficulty for the average homebuyer. 

Some homebuyers may wait a while to see the significant decrease in prices and that may take up until next year to arrive. The increase in interest rates and trickling of inventory may go ahead and lessen the demand we see. What is certain is that the housing market will continue to be an especially difficult one for homebuyers this year. 

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