The 3 Main Factors Affecting Home Buyers in 2022

Rapid inflation will play a key role in housing decisions in 2022. While rising prices may squeeze budgets and prompt households to look for a way to save on housing costs, many buyers will see the fixed cost of a long-term mortgage as a hedge against inflation. And as rents continue to rise, and mortgage rates remain low, it’s likely that those who have the means for a down payment will choose to buy instead of rent, adding to the demand and keeping prices rising. 

Employers’ shift to remote work will play a role, too. The pandemic ushered in a new era in flexible and remote work, and even more people will have certainty next year about their employer’s potential workplace policies. Buyers who no longer have a daily commute have new freedom to separate where they live from where they work. This newfound ability to live anywhere and a desire for more space has prompted many moves to homes farther away from city centers whether that’s to a far-flung suburb or a completely different area of the country. 

Prices rose so high so quickly in the hottest markets of 2021 that affordability-conscious buyers will likely turn their attention elsewhere in the coming year, with smaller, more affordable markets seeing a surge in popularity. Perhaps counterintuitively, this emphasis on affordable living may also mean buyer demand will be surging near some downtowns. Pandemic price gains in many suburbs mean the affordability benefits of moving out of the city are no longer as great. As local economies continue to recover and people become more comfortable with in-person activities during the continuing pandemic, the lure of city amenities should attract more buyers. 

We are predicting that there will be…

More buyers than homes for sale.

A healthy real estate market has about six months of unsold inventory. That means it would take six months for all the homes on the market to sell at the current sales rate. But unsold inventory nationwide was less than half of that in recent months.

Home prices will rise, but not as quickly.

Home prices are expected to increase year-over-year but at a slower pace than in 2021.

The National Association of Realtors projects home prices will increase just 2.8% in 2022, far less than the estimated 14.7% gain in 2021.

Other experts’ predictions vary, but the projected percentage gains are still in the single digits. Fannie Mae projects a 7.4% increase. Freddie Mac predicts it at 7%, and the Mortgage Bankers Association projects a 5.1% bump.

Mortgage rates are expected to increase.

Average mortgage rates remained at historic lows in 2021, with the average 30-year fixed-rate hovering around 3% at the end of the year. Economists forecast that rates will increase in 2022, but it’s important to keep that in context. Even if they go up as projected, they will still be fairly low.