The Year in Review in Real Estate | The Source Weekly - Bend, Oregon

The Year in Review in Real Estate

... and what to expect in 2022

Our 2021 is winding down and it is without question that this past year proved to be one of the hottest and dramatic years for the real estate market. After the 2020 surge, many questioned what was going to happen to the housing market as we navigated our way through the second year of a global pandemic. Foreclosure moratoriums expired, eviction moratoriums expired, mortgage interest rates remained low and housing prices skyrocketed once again.

Home sales are on track to reach a 15-year high, with an estimated 6 million homes sold nationwide in 2021. According to the Federal Housing Agency, home prices rose steeply at nearly 20% from the third quarter of the year prior. This turned out to be the largest home price increase in the agency's index since it began keeping record.

The Year in Review in Real Estate

It became commonplace to put a home on the market and have it sold within mere days with multiple offers and for well over listing price. The story for buyers was a different tale. The inventory continued to shrink and buyer demand—often buyer desperation—created an ultra-competitive market that left many buyers feeling dejected and hopeless in the home search. The supply chain and labor shortages did no favors for the housing market crunch, as builders found themselves waiting weeks, even months, for materials which then caused major delays in new construction inventory hitting the market.

What does 2022 hold for the real estate market? By all accounts, experts agree that inventory is expected to grow; it will not grow at a pace strong enough to meet demand. is predicting a slight 0.3% increase in inventory for 2022, which will again fuel a competitive market.

Mortgage interest rates are expected to increase, as the Federal Reserve has signaled an inflation-curbing end to the pandemic monetary policies of 2021. While the interest rates are expected to rise from the historic lows of the last nearly two years, they are not expected to rise to pre-pandemic rates of 4%. Lawrence Yun, chief economist for the National Association of Realtors, has stated his expectation that a 30-year fixed rate will rise to 3.7% by year end.

Home prices are expected to rise again in 2022, but not in the double-digit percentages experienced in 2021. This is, in part, a result of the expected rise in interest rates throughout 2022. Many are expecting a 5.5% to 6% increase in pricing for the year, signaling a step toward a more normalized market.

First-time homebuyers are expected to continue facing challenges in entering the market. As prices have risen faster than people can save for a down payment, it has created challenges for buyers to compete with cash offers and loan programs that require a significantly higher down payment. The percentage of first-time homebuyers fell nearly 6% in 2021, making for less than a third of the buyer activity.

While no one holds a crystal ball (and as history shows) there is no guarantee for the future. A fact clearly demonstrated in 2020, when not a single person saw a pandemic teeing off arguably one of the hottest real estate markets in history. For now, it is looking like we may finally be seeing steps toward a normalizing market and consumer surveys are showing that owning a home still remains a top priority in 2022. Happy New Year and see you all in 2022.

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