Buying a Home in 2022? - Position Yourself for Success
Despite a global pandemic, record-low interest rates and shifting demographic trends ushered in a new housing bubble. The housing market is active, with inventory continuing to be a challenge in 2022. If you’re a seller, make hay while the sun is shining. But, if you’re on the hunt for a home, you’ve most likely experienced the agony of defeat in this crazy, competitive environment.
Homes are selling within a few days of going on the market, sellers are “choosing” buyers from a pool of candidates, and when the dust settles from bidding wars—the amount someone will ultimately pay for a home can far exceed the asking price.
Positioning yourself for success starts by understanding the market and getting your mortgage financing ducks in a row.
What does the Real Estate Market look like in 2022?
According to Realtor.com, the housing market is anticipated to increase 6.6 percent this year as a growing economy and declining unemployment continue to fuel buyer interest - despite the fact that mortgage interest rates are expected to climb. Existing home sales in 2021 totaled 6.12 million, an increase of 8.5 percent from the prior year and the highest annual level since 2006.
However, the unexpected demand the past few years had unanticipated consequences, as hopeful buyers outpaced the number of homes on the market. By December of 2020, the number of homes listed for sale had fallen 23 percent year-over-year, the lowest market inventory since tracking began in 1983. A lull in new home construction was partially to blame,1 but seller reticence can’t be discounted. Many Americans decided to stay put, refinance and upgrade, and the idea of finding a home after selling theirs became a daunting proposition. Inertia was in control, and the housing market at rest, stayed at rest.
Although inventory will remain limited in 2022, realtor professionals expect the market to rebound from 2021 lows and anticipate inventory to grow 0.3% on average this year. But, the question remains whether an inventory expansion can stem the tide of rising home prices. Affordability will remain a challenge as median home sales prices are set to continue to increase, rising 2.9% in 2022.
This market phenomenon is particularly tough on younger generations, who are predicted to make up more of the market this year. Older millennials are trading up to bigger homes, a move that is largely dependent on Baby Boomers and Gen Xers vacating current homes, but according to the National Association of Realtors, only 14 percent of older boomers and 18 percent of young boomers are selling, compared to the 23 percent of older millennials seeking to buy. If you do the math, things aren’t adding up.
That means for buyers, it’s complicated. While mortgage rates are expected to climb throughout the year, they will likely remain low enough to entice buyers. Buyers are ready to make offers, but the inventory shortfall may not meet demand. In this homebuying game of chess, savvy purchasers know what it takes to gain an advantage when they make their next move.
Four Steps to Take Before Making an Offer on a House in 2022.
Despite market, it is possible to purchase a home in 2022. Buyers can be poised for success by lining up their financing first, so they are ready to act quickly when their dream home presents itself.
- Get Pre-qualified – Mortgage pre-qualification or preapproval are essential to the process as sellers entertain multiple offers. In fact, more than 65 percent of homes listed in March of 2021 sold after an ensuing bidding war between buyers. When purchasing in a competitive market like this, your bid is likely to be overlooked without a lender pre-qualification, or possibly even a full preapproval.
Let’s back up, there’s a difference between pre-qualification and preapproval? Yes. Pre-qualification provides the buyer with information about much home they can afford based upon criteria such as credit score and income. A preapproval is more robust. During the preapproval process, your lender will thoroughly vet your credit history and all of your documentation, to determine how much you may borrow under specific mortgage program guidelines. The good news is you’ll be truly approved for your loan when you find your home.
- Talk to a Mortgage Lender First – If you haven’t figured out the best place to start your home search, it’s with a mortgage lender and preferably one who understands the market in which you live. Home prices, job stability and other factors that determine your mortgage eligibility can be influenced by location. A local lender will have awareness of these conditions and account for them appropriately when getting you ready to go into “homebuying battle.”
- Understand the Mortgage Process – You should also understand the mortgage process to avoid inadvertent actions that could impact your ability to get financing or how much you can borrow. There are precautionary measures, which you and your mortgage loan officer can discuss before you even start your home search.
- Learn about your Mortgage Options – As home prices rise, you may feel that home ownership gets further out of reach but try not to be discouraged. There are a wide variety of government and investor programs to help specific groups of buyers, including first-time purchasers, afford a home. Again, lean on your mortgage lender to show you all available financing options and help you make decisions about those most aligned with your homebuying aspirations.
Don’t despair! Purchasing a home in 2022 may require tougher skin (and some good vibes), but it’s not impossible. Your home is out there and when you find each other, you’ll know. Having your financing lined-up to quickly act when that time comes will give you an edge over the competition.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.