Missed Out on Buying a Home in 2021? 3 Things to Know Going Into 2022
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Here's some key information if you're thinking of buying a home in the new year.
Key points
- Next year's housing market could mimic 2021's in terms of home prices and limited inventory.
- Mortgage rates could also stay low throughout 2022.
Many people rushed to buy homes in 2021 to take advantage of low mortgage rates. But if you missed that boat -- say, you didn't manage to get an offer accepted or had to pause your search as home prices climbed out of your affordability range -- then you may be gearing up to buy a home in 2022.
But will the housing market be any different in the new year? Here are three things you need to know.
1. Inventory could remain low
In October, total housing inventory came to just 1.25 million units for sale, according to the National Association of Realtors (NAR). That represents a 12% drop from a year prior.
A big reason the housing market has lacked inventory is that sellers have been hesitant to list their homes due to pandemic-related and economic uncertainty. Unfortunately, that sentiment could continue well into 2022.
Though unemployment is down on a national level, fears of the new omicron variant could prompt some would-be sellers to sit tight and wait things out. And so we could see another year with record-low inventory.
2. Home prices could remain high
In October, the median price of an existing home sold rose to $353,900, reports the NAR. That's a 13.1% increase from the previous year.
A big reason home prices have been so high is that inventory has been limited. Buyers have been forced to compete over the same few properties and raise their offers in the course of bidding wars.
Since inventory could remain sluggish in 2022, home prices may not budge all that much from their current level. Buyers who were priced out of the real estate market this year may, unfortunately, have a similar experience in the coming year. The good news, though, is that pausing their home searches may have allowed some buyers to boost their cash reserves, making it possible to buy a home that's more expensive.
3. Mortgage rates are likely to stay competitive
Though home prices have been inflated this year, competitive mortgage rates have helped offset them. And next year, mortgage rates are likely to stay pretty low.
The Mortgage Bankers Association predicts the average rate for the 30-year fixed mortgage will rise to 4% in 2022. By comparison, as of this writing, the average 30-year mortgage rate is 3.33%.
But to be clear, from a historical perspective, a 4% mortgage rate is still very low for a 30-year loan. Also, if rates do indeed climb to 4% in the new year, that should happen gradually, not overnight. Home buyers may at least get to benefit from competitive financing options in 2022.
Will 2022 be a good year for you to buy a home?
Only time will tell. But if you're serious about purchasing a place of your own, do your best to boost your credit score, pay off existing debt, and sock money away for a down payment. Doing so will increase your chances of not only qualifying for a mortgage but locking in a low interest rate that makes your new home more affordable.
Our Research Expert
Maurie Backman writes about current events affecting small businesses for The Ascent and The Motley Fool.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
