The housing market has been a tough one to navigate in 2021 -- at least from a buyer's perspective. Record-low inventory has amped up the competition, making bidding wars a given in some hot markets. And with mortgage rates sitting at competitive levels, buyers have been clamoring for homes -- and have been paying sky-high prices for properties in an effort to take advantage of competitive financing options.

But while 2021 has clearly been a seller's market, will the same hold true for 2022? Here's what individual homebuyers and real estate investors alike need to know.

People standing outside of house with open house sign in front of it.

Image source: Getty Images.

We could have a repeat year

For both homebuyers looking to purchase homes and real estate investors hoping to score income properties in 2022, here's some potential bad news. It could be the case that 2022 largely mimics 2021 with regard to sellers having the clear upper hand. Here's why.

Inventory may not pick up all that much

A lack of inventory has contributed to buyers' woes this year. And things may not improve much in that regard next year -- or at least not initially.

A big reason inventory has lacked is that sellers have let general economic and pandemic-related fears stop them from listing their properties. Right now, the economy is much improved from an unemployment standpoint, but inflation is still throwing many consumers for a loop. The pandemic is by no means behind us, either, and with winter weather coming, COVID-19 cases could surge once again.

As such, there's no reason to believe we'll see a substantial increase in housing inventory during the first part of 2022. And while things could pick up if economic concerns settle and COVID-19 cases peter out, we may be months from getting to that place. If housing inventory doesn't pick up, the competition will remain fierce, giving sellers a clear edge.

Mortgage rates could remain competitive

The Mortgage Bankers Association predicts that the average rate on a 30-year fixed loan will rise to 4% in 2022, compared to the average 3.3% rate it's sitting at as of this writing. But to be clear, in a historical context, 4% is still a very attractive rate for a 30-year fixed loan. And it's a rate that's unlikely to drive a substantial decrease in buyer demand. The more demand for homes relative to supply, the more of an upper hand sellers get.

Should you buy a home in 2022?

Many challenges buyers experienced in 2021 could hold steady into 2022. So, it could pay to put your homeownership plans on pause a bit longer if you're looking to buy a place to live in yourself.

If you're looking at buying a home to serve as a rental, it's a slightly different story. Home prices may be way up these days, but so are rental rates. So, if you add an income property to your portfolio, what you lose in the form of paying a higher price, you might gain in the form of higher rent.

That said, there are plenty of ways to expand your real estate portfolio without buying an actual home. If property values are too high for your budget, you can look at buying REITs (real estate investment trusts) instead. In fact, given that the demand for rentals is so high these days, you may want to look at residential REITs, which focus on properties that can include apartment buildings, student housing, and even single-family homes.