What 2022 means for homebuyers
The U.S. housing market had another scorcher of a year in 2021, aided by low mortgage rates, a swell of demand that outstripped supply and a rebounding job market.
Trends point to another solid year for the housing market, even as it remains especially challenging for first-time buyers, says Lawrence Yun, chief economist for the National Association of Realtors.
Yun recently spoke to The Associated Press about what homebuyers and sellers can expect as the upcoming spring home-buying season begins.
How do you see the housing market’s trajectory shaping up this year?
Mortgage rates will definitely be higher, which means that people who were barely able to qualify last year will not be able to do so this year. Combine that with some increase in supply. Builders have the profit motive. Lumber prices and other materials costs are rising, but they’re simply tacking on those additional costs to consumers, who are willing to buy. Price growth will be something around 5% in 2022, which will be a very normal rate of increase.
Fair to say homeowners who are selling will still have an edge on buyers nationally?
We’re in a housing shortage of roughly 3 or 4 million. And given that homebuilders can probably at the maximum put up maybe 2 million homes, more likely 1.7 or 1.8 million homes (a year), this housing shortage will persist this year and probably linger on somewhat next year. Hence, the market in 2022 will still favor sellers.
How high do you see mortgage rates going this year?
My best guess at the moment is about 3.7%. It could be a little lower or a little higher, but it’s going to certainly be higher than the 3% people enjoyed last year.
To what degree will higher rates dampen home sales?
Rising home prices have hindered affordability, but now rising interest rates are another thing that will begin to shave off some of the demand potential from first-time buyers. My official forecast for home sales this year is they will come down about 2% from last year.
Has the pandemic led to any enduring changes to the way Americans buy and sell homes?
The pandemic will come to an end. Hopefully, the sooner the better. But the work-from-home situation, that development is here to stay. That will be the key factor driving the housing market preference and demand.
What’s the biggest worry you have about the housing market now?
The concern is really first-time buyers. If we don’t increase supply sufficiently, we will have a situation where the country becomes more divided. Homeowners are feeling very wealthy. Renters are feeling very frustrated, beginning to see accelerating rents.
So, we need to ensure that housing supply continues to increase.