Since the start of the pandemic, I am constantly asked: “Where do you think the housing market is going?” Buyers are hoping for a crash to help with their affordability issues and to end the bidding wars. Sellers are hoping the market continues to go up and they can cash out at an even higher price. If only we had a crystal ball that could give us the answer.

No one saw the current sellers’ market coming. In fact, at the beginning of the pandemic in 2020, most brokerages started encouraging agents to take foreclosure classes and give tips on weathering a downturn. As prices skyrocketed about 20% over the course of the past year, we can safely say everyone guessed the wrong housing outcome for the pandemic. What are my predictions for 2022?

It is anybody’s guess! Below are five trends to watch that may indicate how the 2022 market will go:

1. Interest Rates:

Even with raising home prices, mortgage rates have remained incredibly low throughout the pandemic. This has incentivized buyers to continue to shop and remain in bidding wars to take advantage of the low rates. However, the rise of inflation has raised concerns. The Fed is now planning to raise rates three times next year. They are hoping to lift rates from 0% to 2.1% by the end of 2024.

However, let’s keep these mortgage rate hikes into perspective. The Mortgage Bankers Association predicts rates will hit 4% by 2022’s end. On the low end, Fannie Mae expects the 30-year fixed to average 3.4% at the end of the year. Before 2010, interest rates below 4% would be a steal. Personally, I still think buyers will be incentivized to buy at higher interest rates. The higher rates will hopefully cool pricing as money will cost more to borrow for the average consumer.

2. Boomers vs. Millennials:

And yet again, these two generations are at odds. Both generations are looking to move and are competing over the same homes. According to forecasts, there won’t be enough homes to satisfy all of the demand next year.

“Even as millennials are the biggest players in the U.S. housing market, buyers are trending older. The median age of a recent buyer — somebody who bought a home in the past year — was 44 in 2019, up from 40 in 2009. That’s largely because baby boomers, who make up a big share of the population, are also more active in the housing market than those their age ten years ago. The share of recent buyers who are 60 years and older grew 47% from 2009 to 2019. Over the same period, the share of recent buyers ages 18–39 fell 13%.

This means that millennials, already grappling with skyrocketing housing costs from pre-pandemic housing trends and student debt that make saving for a down payment a steep hill to climb, also generally have more competition from their parents’ and grandparents’ generations than their predecessors did.” Click to read original report.

3. Workplace Flexibility:

There have been multiple false starts as corporations attempted to call employees back into a physical office. With the fear of the Omicron variant, we may see another delay in bringing workers back into the office. If corporations do ultimately call workers back in, we will likely see fewer buyers in second home markets and the exurbs. The pandemic caused these markets to see a boom and urban core markets to wane. That may reverse itself if work from home declines.

However, “The Great Resignation” is seeing a shift in work culture and what employees expect. If the trend of mass resignations continues, working from home may become a more permanent fixture to keep top talent. One-in-five prospective sellers (19%) stated they were looking to move because they no longer need to live near the office. We may see the work-from-home trend continue to affect housing even after the pandemic.

4. Continued Rise of the Suburbs:

With workers less tied to their physical desks, suburbs continue to rise in popularity. This continued trend from 2021 is not expected to wane next year. As prices increased, suburbs became more attractive for affordability reasons. Suburbs also tend to be larger in size allowing work-from-home households to get the extra office space and “zoom rooms” that they need. As buyers tire of bidding wars and as millennials look for affordable housing as their familes grow, suburbs are becoming more and more attractive.

5. Buyers Tiring of Bidding Wars:

More homebuyers are finally beginning to push back against surging prices. In October 2021, 60.3% of sales involved a bidding war, which is down from the all-time high in April 2021 (74.5%). I personally have had more buyers taking a break – burnt out emotionally and financially by the current market. I also have more buyers refusing to even put in an offer on a home that calls for “highest and best”. As more buyers sit out, sellers may start to see current tactics backfire and need to find new ways to entice high prices. With rising interest rates, you may also see more buyers forced to stick to budgets and unable to participate in bidding wars.

Check out the articles below for more in-depth information on the 2022 Predictions:

• Where the housing market is going in 2022 as told by 7 leading forecast models
• FORECAST: 2022 REAL ESTATE MARKET WILL BE A MIXED BAG
• 2022 Housing Market Hidden Gems
• 2022 Housing Market Forecast and Predictions: A Whirlwind Year
• Baby Boomers and Millennials Are Competing for Homes, and Boomers Are Winning
• The Property Line: Harsh Vibe Continues for Home Buyers in 2022

Send Laura Your Own Questions About the 2022 Market