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A Guide to 2022 Real Estate Predictions

A Guide to 2022 Real Estate Predictions

The COVID-19 pandemic changed everything about our lives, from how we work to how we socialize. And while every industry underwent changes during the pandemic, few had as dramatic a transformation as the housing market. The 2021 housing market was historic, to say the least, with bidding wars and inventory shortages and the lowest mortgage rates in living memory. Experts say the 2022 housing market will be a return to more of an even keel than last year’s market. Read on to discover some of the top real estate predictions for the upcoming year.

Construction Prices Will Drop

In 2020 and 2021, we saw the costs of new construction go through the roof. Like every industry, the construction industry saw serious materials shortages and increasing prices as a result of the pandemic. In particular, wood prices skyrocketed; the price of a two by four went from about $2.60 to more than $8.

However, lumber supply chains are finally starting to catch up, and supply prices are coming down. Builders will be able to get their materials for something closer to pre-pandemic prices. From there, they can pass the savings along to customers and investors who are building new homes.

Home Building Will Increase

It should come as no surprise that, as construction costs fall, building rates will rise. During the last year, housing market inventory dropped sharply as homeowners and investors alike tried to snatch up houses. Bidding wars broke out, and the existing housing market inventory couldn’t keep up with demand.

Now that construction has become more affordable again, that increased demand will lead to increases in home building rates. Many construction companies may have already cleared land on hold that they’ll start developing. The housing market inventory should start balancing out again as new construction rebounds.

Buyers Will Flood The Market

In 2020 and 2021, investors took over a large portion of the housing market transactions. Potential landlords, flippers, and other investors took advantage of the historic low interest rates to lock down new assets. Buyers who couldn’t compete in the bidding wars backed off and decided to bide their time until the feeding frenzy slowed down.

As we’ll discuss more deeply in a separate real estate prediction, interest rates are on the rise, and most investors have already made their move. As bidding wars slow down and transactions return to a more normal footing, we’ll see your more typical buyer making their way back into the market. There will be plenty of buyers for all the new inventory coming on the market, and sellers won’t have to wait around for their homes to move.

Bidding Wars Will Continue

While the bidding wars we saw in 2021 will slow down some, that doesn’t mean they’ll stop entirely. We do think that increased inventory will level out the buying process somewhat. But the truth is that homes take time to build, and it’ll be a while before the housing market is truly back to normal.

With inventory still being a little short in supply, we’re likely to see houses continuing to move for above listing price. As we’ll discuss more later, buyers who want to stay competitive in the market will have to have more flexible budgets and larger down payments. There may also be some pressure to agree to sellers’ terms just to get an accepted offer.

Days On Market Will Increase

If you sold a home in 2021, chances are you had an offer within a matter of hours. Many houses sold in less than a day, and those that did stay on the market longer than that rarely lasted more than a week. Sellers had to be prepared for a rapid-fire showing and bidding process once they listed their homes.

As the market normalizes, we’re likely to see that number of days on the market increase. A healthy home listing should still only be up for a few weeks or so, but homes likely won’t be selling within hours anymore. This will make it easier for buyers to get the homes they want and for sellers to make sure they like the offers they’re getting before they accept.

Prices Will Come Down

Part of what made the 2021 housing market so unusual was the way that house prices skyrocketed. The severe shortage of new housing inventory and the influx of investors drove market values through the roof. But ask the market starts to level back out some, we’re likely to see those numbers come down.

House prices likely won’t return to pre-pandemic levels yet, and most experts aren’t predicting anything like the housing market bubble burst of 2009. Instead, we’ll see these prices come back down to normal ranges. This is good news for buyers trying to get together enough money to compete in bidding wars without resigning themselves to buying a shed.

Property Values Will Stay High

It may sound like a contradiction in terms to say that house prices will come down, but property values will stay high. But experts are predicting both of these things in 2022 housing market forecasts. At the end of the day, it all comes down to a question of relative prices.

Yes, we are likely to see house prices come down as the bidding wars ease up and houses don’t go for so far over list price. However, property values are likely to remain higher than they were at the beginning of 2020. And as the market appreciates, those values will continue to grow, albeit more slowly.

The Market Will Continue To Grow

During 2021, we saw the housing market increase more sharply than it has in decades. Although steady growth and declines are normal, this growth chart was all but vertical. While some people feared another market bubble burst, most experts agree that we’re not likely to see a crash this time around.

While the market won’t see the sort of meteoric growth it did during the pandemic, it will likely continue to grow. The influx of buyers will bolster the 2022 market, and although prices will come down some, they’ll still stay higher than they were pre-pandemic. Buying a home now could help you make a lot of money over the next five to ten years.

Mortgage Rates Will Rise

During the economic downturn that accompanied the pandemic, mortgage lenders dropped interest rates to historic lows. Homebuyers could get mortgages with interest rates as little as 3 percent. This is part of what led to the rush on investments that we saw during the last year.

Now that the economy is returning to normal, mortgage rates are likely to rise again. Most experts agree that this increase will return rates to what we saw them at before the pandemic. If you’re considering buying a house, it’s a good idea to do so sooner rather than later so you can take advantage of the lower interest rates.

Down Payments Will Grow

We mentioned earlier that the bidding wars we saw in 2021 drove a lot of potential buyers out of the market. These private homeowners didn’t want to compete with the investors, and in many cases, they couldn’t get an offer in on a home they wanted before it was off the market. So many buyers decided to bide their time and save their money.

This extra saving time has put buyers in a great position to put down a larger down payment. Not only can this help them to avoid mortgage insurance, but it can also help them counteract those rising mortgage rates. Higher down payments may also give buyers extra negotiating power during the continued bidding wars.

Buyers Will Move To Smaller Cities

The COVID-19 pandemic changed more than just the housing market; it changed every aspect of life for many of us. In particular, millions of Americans have now shifted to a work-from-home setup. This means that they have more freedom to live where they want without the consideration of a commute.

Since they no longer need to commute into large city offices, many buyers will move out to the suburbs. Lower crime rates, better schools, lower taxes, and more affordable homes are all major draws for homebuyers. We’ll see these residential areas start to grow and big city real estate sales slowing down.

Outdoor Living Will Rise In Value

In addition to there being more demand for suburban living, the 2022 market is likely to see homes with great outdoor living space increase in value. The last year taught us exactly how exhausting and miserable it is to be inside all the time. Homebuyers want to see the sun, and what could be better in a work-from-home setup than a gorgeous backyard retreat?

Outdoor living spaces will become more prized than ever, and sellers may want to focus on upping their curb appealPools, grilling areas, patios, decks, and verandas will all become major selling points for a house. Even gardens can be a draw as people carry on their pandemic gardening hobbies in new homes.

Rent Prices Will Grow

While the 2021 housing market set up some amazing opportunities for a lot of people, it also left a lot of people in dire financial straits. More than 22 million Americans lost their job in the early months of the pandemic, and thousands of businesses have been forced to close their doors. Potential buyers who may have had steady income before the pandemic can no longer qualify for a mortgage.

Because of this increased demand for rentals, we’re likely to see rent prices rise. Many landlords are also looking for ways to make up for the income they lost during the eviction moratorium. These increased prices can make it harder for future buyers to save the money they need for down payments and closing costs.

Rent Control Will Increase In Popularity

With rent prices likely to rise, it may come as no surprise that rent control will become more common. Rent control is a great way for cities to keep their prices competitive and young residents flowing in. It can also motivate renters interested in a long-term future in the city to lock in a rate now.

Rent control is also a great way to stem the wave of homelessness that could follow the eviction moratorium expiring. Millions of Americans missed at least one month of rent during the lockdowns, and every one of them could be evicted once the moratorium ends. Rent control can help to stabilize the rental market and keep more people in their homes.

Home Inspections Will Be Critical

In a normal market, home inspections are a standard and very important part of the home buying process. But during the frenzy of the 2021 housing market, many buyers decided to forego them. They wanted to get that home right now, and they figured they could fix whatever problems it had later.

Unfortunately, many buyers found themselves sitting on top of money pits with these uninspected homes. As the market returns to normal conditions, home inspections will once again become crucial. Buyers will need to know what they’re getting into before they purchase homes either to live in or as an investment property.

In Summary: 2022 Real Estate Predictions

15 Real Estate Predictions For 2022

  1. Construction Prices Will Drop
  2. Home Building Will Increase
  3. Buyers Will Flood the Market
  4. Bidding Wars Will Continue
  5. Days on Market Will Increase
  6. Prices Will Come Down
  7. Property Values Will Stay High
  8. The Market Will Continue to Grow
  9. Mortgage Rates Will Rise
  10. Down Payments Will Grow
  11. Buyers Will Move to Smaller Cities
  12. Outdoor Living Will Rise in Value
  13. Rent Prices Will Grow
  14. Rent Control Will Increase in Popularity
  15. Home Inspections Will Be Critical

Discover More Real Estate Predictions

The real estate market of 2021 was unlike anything this country has ever seen before. In 2022, we’re likely to see many of those trends leveling out and returning to what they were before the pandemic. The market will still continue to grow, and buyers should plan on having more flexible budgets than they did pre-COVID.

If you’d like to discover more real estate predictions, check out the rest of our site at Dean Miller Real Estate. We make Long Island real estate easy, regardless of whether you are a first-time homebuyer or moving to a better home for you. Start the process of selling a home and achieve your home ownership goals today.

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