It’s home buying season! Spring has always been known for being a popular time of year to buy a home, although, the market hasn’t slowed down too much since the start of the pandemic. The 2022 housing market is still hot, but this year’s home buying season likely won’t reach the same intensity we all witnessed in the super competitive 2021 market thanks to its historically low mortgage rates, which means if you’re (still) searching for your dream home, you can (hopefully) finally start to breathe a very slight sigh of relief.

Buying a home is exciting, overwhelming, frustrating, fun, and discouraging all wrapped up into one. There’s so much more involved when it comes to buying a home than scrolling through Zillow and staring at beautiful photos that immediately have you fantasizing about growing your family there, what the neighborhood is like, and how you’ll decorate to make it your own. House hunting and getting ready to buy a home is an emotional rollercoaster. It can be easy to get discouraged especially if you’ve fallen in love with a home that perhaps you haven’t been able to see yet, or worse, you’ve seen it, put an offer in on it, and wound up being outbid.  

Buying a home will always come with its fair share of ups and downs and challenges, especially in this post-pandemic day and age. So, if you’re looking for your perfect home in 2022, here’s what may be in store.

What to Expect in the 2022 Housing Market

The similarities between the 2021 and 2022 housing markets are pretty similar so far, but there’s one major difference and it’s something we’ve all been experiencing in every single aspect of our lives. I’m sure we’ve all heard and experienced that three-syllable word that starts with the letter “i” more often than we’d like to lately. Due to inflation, costs have been on the rise across the board on things like groceries, gas, automobiles, utilities, building materials and supplies, such as lumber, and so much more, which has put a major dent in our wallets and budget.

Mortgage Rates are on the Rise

Mortgage rates are certainly no stranger to the current economy as inflation relates to the housing market, and rates are quickly on the rise as a result as a way to combat it. While rates are expected to increase throughout the year, one important aspect to note is that they’re likely to remain relatively low and competitive (though not quite as low as the 2.65% average in 2020 and 2021) in comparison to extreme high rates (think back to the early ‘80s where the average 30-year conventional mortgage rate was a whopping 16.63%!) we’ve seen in previous years.

So, does this mean that rising rates are scaring off buyers and slowing down the housing market once and for all? It’s an interesting and valid thought, but not exactly and I’ll explain why. While some may shy away and put house hunting on the back burner in 2022, others are doing the exact opposite as they feel an increased sense of urgency to buy a home now more than ever because of the sole fact that mortgage rates are on the rise. These types of buyers may be fearing that mortgage rates and prices of homes will continue to increase without an end in sight, so they figure they might as well buy now to receive a decent rate and get the stress of it all over with.

With that being said, though, it could potentially throw another wrench into these buyers’ plans. And the reason being is quite simple: we’re still in a housing market that heavily caters to sellers. And now not only do you have buyers from 2021 that are still searching for their home, but you’re also throwing new 2022 buyers into the mix to shake things up even more.

It's Still a Seller’s Market … Mostly

It’s no secret that sellers have had the upper hand since mid-2020. Don’t get me wrong, the 2022 housing market is absolutely improving for buyers compared to how it was in 2021, but ultimately, we remain in a seller’s market … for the most part. A seller’s market is when the demand for homes exceeds the supply of available homes, putting sellers in a much more advantageous position as they list their homes for sale.

Let’s look back for a moment. 2021 was a historic year in terms of home value and the cost of homes skyrocketed at a record pace. For example, according to CNN, the average home sale price was listed at $346,900, which drove sales up to a 16.9% over 2020 and allowed for sellers to earn an average of approximately $50,000 more in home wealth. Additionally, in 2021, buyers found themselves in constant bidding wars and were practically scooping up homes as quickly as they hit the market, often paying significantly over the initial asking price. In turn, this drove sales prices up even higher leaving sellers in yet again another favorable position as they had more negotiating power.

Now, let’s fast forward to where we’re currently at. Is the outlook any different in 2022? Well, as I mentioned earlier, and though we’re still mostly in a seller’s market, things are improving … slowly but surely. The market is cooling down ever so slightly, which means there are more opportunities being presented to buyers. Buyers are finally starting to get more bang for their buck this year, especially as home prices begin to become more stable. This year, buyers are also finding themselves in a spot where they can realistically compete against other strong buyers by submitting healthy, worthwhile offers on homes. Plus, buyers are beginning to pay much closer to the seller’s asking price considering the rising rate environment.

Home Demand is High

Home demand is continuing to be a driving force in this market. Though home prices are still increasing, it’s at a much more modest rate of 2.8%, which is a significant drop in comparison to the 14.7% jump in 2021 according to the National Association of Realtors.

Part of the reason behind the high demand is due to the low inventory of homes. However, buyers everywhere are starting to rejoice as more new construction homes are being built and quickly becoming available to meet their wants and needs, and of course, budget, which is definitely a huge help.

Tips for Buying a Home in 2022

As you start your homebuying journey, keep these helpful tips in mind to assist you in making the most with your search:

Get Pre-Approved: First and foremost (and perhaps the most crucial step), get pre-approved before you start the search for your perfect home. Your pre-approval gives you a leg up on the competition over those that may have skipped this step, shows sellers that you’re a serious buyer that’s ready to make a solid offer, and gives you more confidence in your budget and purchasing power.

Prioritize Wants vs. Needs: With homebuying on the brain, I’m certain you’ve got some sort of wish list going. Whether you’re envisioning a large eat-in kitchen, multiple bedrooms/bathrooms, big backyard, safe neighborhood/good school district, tall ceilings, spacious garage, or some other sort of amenity, you’ve got to take time to prioritize your wants versus needs. Break down your must-haves to determine what you truly need and what you can want but can live without to save yourself a little heartbreak. It’s important to understand that you likely won’t be able to check off every single item that’s on your list, especially when it comes to today’s market where supply is still tight. There are times where you must be willing to compromise when necessary and remember what you can comfortably afford.

Have a Healthy Down Payment
Due to the current market, many homeowners are recognizing the importance of having a healthy, competitive down payment. For years, 20% was always the more “traditional” amount to have for a down payment, but it’s certainly not a requirement. And nowadays, most lenders are willing to work with you and your budget by offering special loan programs and products to help you come up with a healthy down payment that will still work for you financially.

I will say, though, that there are major advantages in putting down a larger down payment. For starters, the larger the amount you put down, the smaller your loan balance will be, which means you’ll pay much less in interest over the loan’s lifetime. Additionally, putting more money down also equates to a lower monthly loan payment making it more manageable on you and your wallet, while providing you with the opportunity to pay your mortgage loan off quicker. Another advantage of a larger down payment is that it can help you avoid having to pay private mortgage insurance, or PMI. PMI is put into place when buyers put too little down, which makes them appear riskier to a lender. So, PMI helps to protect the lender in the event a borrower defaults on the mortgage.

Regardless of how much or how little you put down, be sure to take a realistic look at your budget and work with your lender to come up with a down payment that you’d be most comfortable with.

Work with a Local Real Estate Agent: Use a local real estate agent that knows the area inside and out that’ll be there for you every step of the way and can get you into homes quickly. You want a real estate agent that will advocate for you and serve as your guide to get you into the home you want at the price point you want. Communicate and confide in them by expressing what’s most important to you so they can show you properties that are worthwhile. When searching for the right realtor, talk to your family and friends first about who they’ve used and if they’d recommend them. If you’re relocating to a new area, do a simple Google search to read reviews or check out social media platforms to get a real-feel for how well they interact with their clients.

Get into Your Dream Home with GOLD

Buying a home can feel like a full-time job, but when you’ve got the right people on your side, then the process will be a breeze and you’ll be kicking back in your new home before you know it.

If you’re planning a move in 2022, you need the Lehigh Valley’s #1 Mortgage Lender; you need GOLD. We’re here to guide you through the home buying process from pre-approval to close with ease and confidence to help you make your homebuying dreams a reality. Check out our mortgage loans and competitive mortgage rates to find what suits your goals, needs, and budget, and be sure to get in touch with our dedicated Mortgage Consultant to take the first step: 1-800-641-5036.

Darian Phillips

Darian Phillips

Darian is the Vice President of Lending at GOLD. She is responsible for directing and coordinating lending operations within the credit union. She implements and manages changes and improvements that improve our Members' overall experience. Darian loves being able to help our Members achieve their financial goals, whatever they may be. 

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