Yes, it will still be a seller’s real estate market in 2022
Home sellers in the United States had the upper hand throughout 2021, mainly due to tight inventory conditions. Today, many buyers are looking to 2022, hoping that conditions will be more favorable.
The reality is that it will probably be again be a seller’s market in 2022.
While recent reports have shown a promising increase in the number of new real estate listings, the overall inventory remains seriously depleted. That’s part of what created the current seller market in the first place, and 2022 may bring more.
Another sellers’ market in 2022?
What exactly is a seller’s market? This real estate scenario occurs when the demand for housing greatly exceeds the available supply. In other words, it is when there are more buyers in the market than there are properties for sale.
We’ve seen a lot of them in 2020 and 2021. In fact, housing market inventory levels in many US cities have never been lower than they are now. This is especially true in booming real estate markets like Austin, Boise, and Denver, to name a few.
While housing conditions can vary from city to city, most of the United States is currently a strong seller’s market. In 2022, these conditions are likely to persist to some extent.
To be clear: market conditions do appear to be changing, with an increase in new real estate listings reported nationwide. But these changes are unlikely to be enough to move the market from sellers to buyers – at least not anytime soon.
What it looks like now, we might still be in a seller’s market until 2022.
A story of supply and demand, as always
When there are a lot of homes on the market but not many people are buying, you have a classic buyer’s market scenario. On the other end of the spectrum, low supply and high demand create a selling real estate market by increasing competition. Home prices tend to rise rapidly in the latter scenario.
The truth is, we were already in a seller’s market when the coronavirus pandemic began. The public health crisis crippled the real estate scene in April last year. But it quickly rebounded. In fact, the COVID situation in fact accelerated the US real estate market by giving people a new motivation to relocate, buy homes with offices, etc.
But what about 2022? Will market conditions for these sellers also affect next year? If the current supply and demand situation is any indicator, the answer is yes.
According to a July 2021 report from Realtor.com, new real estate listings are finally on the rise. The company said new listings rose nearly 11% from May to June of this year. Measured year over year, new listings rose 5.5% last month.
But that’s a small part of the total inventory situation. When you look total inventory of the housing market in the United States (that is, the number of houses for sale), you will see a very different picture. The total inventory is still dropping considerably from year to year.
According to the July report from Realtor.com, total inventory decreased by -43.1% in June 2021, compared to the previous year. And the supply levels were already down a year ago.
On the demand side, home sales remain strong with an unexpected increase in May 2021. Low mortgage rates are a big factor.
According to Lawrence Yun, chief economist of the National Association of Realtors: âThe housing market is attracting buyers due to falling mortgage rates, which have fallen below 3%, and a slight increase in mortgage rates. [property] Advertisement.”
Home price growth shows no signs of stopping
Given all of these trends, we will likely still be in a real estate sellers’ market in 2022. But what does this mean for home prices in the United States?
Prices continue to rise steadily in most cities. Earlier this month, Realtor.com reported that the median list price of homes in the United States has reached a new record. The national median listing price hit $ 385,000 in June, up 12.7% from a year earlier.
If you look back 30 or 40 years, you will find that the average annual rate of home price appreciation is closer to 4%. The high double-digit gains of the past 12-18 months are abnormal and unsustainable. They are also a classic side effect of a strong seller’s market.
Most analysts and economists expect house prices to continue rising through 2021 and 2022.
A âcolderâ market that still favors sellers?
While the current seller’s market is expected to continue in 2022, it are signs that the US real estate market is cooling a bit.
Many analysts believe that home buyers are starting to âpull outâ from the market, due to rising prices and the frustrations associated with a competitive market. Going forward, this slowdown in demand could cause home price growth in some cities to slow down, or even stabilize.
According to George Ratiu, senior economist for Realtor.com:
“If these trends persist, lower inventories and price growth could continue to moderate as the housing market returns to a more normal pace of activity as the second half of 2021 approaches.”
Perhaps. But we probably won’t see anything that looks like a real buyer’s market for several years.
Still not enough construction
New home construction has lagged behind demand for over a decade now. There are several reasons for this. High lumber prices and labor shortages are the two main issues facing builders today. This contributes to the “perfect storm” that has created such a strong seller’s market across the United States.
As we reported in May, construction fell most sharply at the smaller end of the size range. The percentage of homes under 1,400 square feet has fallen over the past two decades. This makes it harder for first-time buyers, who often tend to buy these smaller, more affordable homes.
As you can see, there are many overlapping factors that created the seller’s real estate market situation today. And as we see an increase in new real estate listings, that is unlikely to be enough to change the current momentum.
The bottom line: it will likely still be a seller’s market in 2022.