Housing Trends In the US For 2022
The world’s real estate market is the bone of contention since the covid 19 pandemic and so is the case with the US housing market. The housing market in the US has spiked up to the highest rates in US history. The housing market in the US is going through an unprecedented boom, which is being felt across all sectors of the economy. The growth has been phenomenal, whether it be new homes or old ones.
However, disparities have also arisen within the growth rate and the process itself. The growth rates for a minority population have been low while dominant groups have seen an increase in their rates. The minority population of the country is also witnessing a decline in home values.
The market for new homes has seen something similar where there are economic disparities among groups.
Home Prices Nationwide On The Rise
Housing prices in the US have skyrocketed. The rates are so much that income cannot keep up with. Earlier people could buy a property by investing a part of their income but now tables have turned. Now to buy a house, most of the average Americans need to have a sufficient amount of money that is several multiples of their income.
High demand, insufficient available inventory, lowest mortgage rates and a lot of other factors paid their part in these explosively growing years of the real estate industry in the US. This has led to bidding wars amongst prospective homebuyers.
Contributing factors in the Boom of the housing industry:
A number of factors contribute to the hot-selling housing market. We have mentioned below the circumstances that cause chartbuster prices of homes in the US. This growth is a result of numerous factors that have impacted housing markets across the country.
Home Price Growth:
Of course, the most obvious reason for increasing home prices is a positive trend in housing markets across the country. Home prices rise causing demand for housing to increase, which leads to further price appreciation.
The easing of credit terms and conditions along with the increased availability of home loans played a significant role in the growth of the real estate market since it allowed potential buyers to get into the game easily if they did not have enough cash or capital. Mortgage rates have also decreased due to the decrease in the benchmark interest rate, thus making monthly payments more affordable.
The movement of millennials into the housing market is also another major reason for homes selling at high prices. Millennials who have begun to take their careers and lives seriously are now looking towards buying property instead of renting, which has led to a boom in real estate interest.
Housing Demand and Supply:
The law of demand and supply is what caused the graphs to outburst. It is basic human nature if something is hard to reach or out of the way, people will be willing to pay more to get their hands on that.
Statistics show that the number of houses for sale in the US decreased to 838,000 houses in 2020 as compared to 1115,000 houses in 2019. This enormous decrease in the availability of houses feared the buyers that the US might run out of houses very soon.
According to the National Association of Realtors, the existing homes for sale have decreased by 2 percent(as in August 2021) in the US. Active inventory has dwindled over the past few years.
Single-family homes have been the most vulnerable sector as they used to bear a maximum price per square foot. Hence, even though prices decreased, they held on pretty well. This is evident by the fact that only a 1 percent decrease in single-family homes can be seen from 2019 to 2020. Urban development has received a boost in this regard.
Multi-family homes, on the other hand, have had an increased rate of decrease. A maximum decrease of 8 percent can be seen in 2020 compared to 2019(8 percent vs 2 percent). This increase is not surprising as urban development has increased at a rapid pace over the past few years.
However, those who were waiting for their chance have been very eagerly waiting over
With sellers not willing to sell to gain maximum potential profit and buyers willing to buy at maximum prices, this initiated an aggressive bidding war across the housing market of the US.
More buyers are left without a chance to purchase their dream home.
In the current times, as the housing market is at its highest, the mortgage rates are at their lowest. The lower mortgage rates mean lesser interest costs, which translates to more monthly mortgage payments being made!
This has reduced the hindrance in the buying procedure, which has lowered the burden for mortgage applications. The increase in buyers for an already short amount of houses available for sale ultimately leads to higher prices.
According to the Mortgage Bankers Association, mortgage rates are expected to rise slightly in 2022. Here are the mortgage rates mentioned according to the time period and APR which is the cost of the loan to the borrower.
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Higher Building Cost:
The pandemic made people realize how important it is to have a house of your own since it is now a place to live, to work to recreate, and whatnot. The U.S. housing market, as well as the global market, is under major stress since 2011. The lack of workers and materials used in the construction process contributed to the decrease in supply and subsequent increase in demand and price.
Since the pandemic, the price of everything has skyrocketed. Lumber prices and building permits prices increased at least 50%, and workers’ wages went up by 25%. It is predicted that the price of a single housing will increase to around $500,000 in most major cities.
Homebuilders are also seeing price increases and labor shortages. Consequently, they are taking longer to complete projects and this has led to a shortage in housing availability.
Housing construction boomed in the early 2000s after the Pandemic scare. However, since then, there has been a steady decline that went unnoticed until recently. The cost of materials and labor skyrocketed which caused even more people to move out of their homes, which led to even more houses on the market. Even though this may seem like bad news, experts are saying that it is actually beneficial for young people or those who just need cheap housing options. Nowadays, you can find amazing deals on abandoned houses in the middle of nowhere. Skyscanner’s experts have compiled
Heightened Scarcity Driving Up Prices:
There are fewer new houses being built due to materials scarcity since many factories were shut down or abandoned
This includes building material as well. From wood to paints to faucets to concrete, everything has reached its maximum price in this pandemic.
According to the National Association of Home Builders, the cost of building materials has faced an increase of 26.1 percent in 2021 as compared to 2020.
COVID-19 Has Created Supply Chain Issues
Homebuilders have also faced a shortage of building material which further increased the costs. As a result, owning a house of your own has become even more difficult in 2021. Once affordable areas and neighborhoods are becoming more expensive than ever.
Pre pandemic levels saw more inventory and lower demand for homes. This led to meager price growth in the housing market. However, these inventory levels have dropped due to COVID-19 and people are now purchasing homes at pre-pandemic prices.
Because of the lack of supply, homebuilders are facing difficulty in producing enough homes for qualified buyers.
Most Buyers Are Exercising Caution
Even though the economy has been resilient and unemployment is low, many buyers are exercising caution before purchasing a home. Some of them include:
*A lot of people were laid off after COVID-19 and fear losing their jobs in the future. As such, they prefer to stay put in their homes rather than take back payments on a new home.
What are the median home prices in 2021?
According to the latest reports, home prices are continuing to increase. Households that earn a median income face difficulty in purchasing homes. The median cost of buying a home in the US is $404,700. That number was at $358,700 in Q4 of 2020. That’s an 11 percent increase in median price year over year.
House prices continue to climb upwards. This price growth represents a risk and an opportunity. It’s a risk because many Americans find it difficult to buy their own homes. However, it also represents an opportunity for young people who can afford the costs of home prices today.
The Fallout From Rising Home Prices
Rising home prices account for several important shifts in first-time home buyers. First, first-time homebuyers are getting older. A majority of first-time homebuyers are between the ages of 25 and 44. That’s up from 55 percent before the financial crisis hit in 2008. Of course, this trend falls alongside growing wages for young Americans too.
Second, more first-time buyers are carrying much more debt. “Today’s first-time homebuyers have an average credit score of 734, which is 29 points higher than the average just five years ago, and they also have about 46 percent higher incomes.” Many Americans can afford homes today because they carry more debt. The improvement of the average credit score has a lot to do with the fact that many young Americans have stopped closing their cards and decided instead to keep them open. That way they would have a higher score since balances are being paid regularly, as opposed to letting those accounts go into default and fall into collections.
Third, more first-time homebuyers are renting for longer periods before buying
Third, fewer young adults are buying homes due to rising prices and higher rents. With nearly half of renters paying more than 30 percent of their income on housing, many are opting to delay home purchases. Renting is often significantly cheaper than buying, but it also limits population mobility and erodes over time.
Finally, the primary reason Americans are renting homes rather than buying them is that they can’t afford them.
Is the housing market going to crash in 2021 or 2022?
The housing market is expected to crash after 2022 when the supply of building materials increases in the market and the prices reduce.
According to research, homes will be affordable in 2025 because by then there would have been a 20 percent increase in construction of new houses in 2021-2023 due to which demand for homes will drop further.
Foreclosure filings are also predicted to be very low in 2025 because of the stable prices. Houses for sale in 2021 are now being sold at increased prices than what was originally asked for it. This is thought to continue well into 2022 further increasing the demand and reducing the housing supply even more. A potential housing market crash will turn out to be quite beneficial for those who want to buy homes at a lower price. These price reductions are also expected to encourage the construction of new houses because more housing units mean increased competition.
“Construction companies are currently busy building new houses, but they are doing it at a cost that is higher than what buyers are ready to pay,” said one real estate analyst.”When these houses will be put up on sale, it will be interesting to see how the crash plays out.
When compared to the great recession, the U.S. housing market has recovered quite well, especially after the housing stimulus plan was introduced. The process of recovery has also been helped along by low inflation and interest rates. However, an increasing number of analysts are pointing out that this housing market boom is unsustainable and that a crash is inevitable
Housing Market Predictions: Will it be easier to buy a house in 2022??
Young families having dreams of owning a house have faced a lot of struggles in finding a house in 2021. It was the year of a bidding war on housing. Prospective buyers wanted to be the first ones to buy themselves their favorite house. On the other hand, sellers didn’t want to let go of those extra dollars by taking the benefit of the situation.
Here we have a piece of good news to share, it is most likely that the over-heated housing market might cool down in 2022.
Economists have predicted that prices will decrease if the construction of houses increases. The inventory list will increase and the supply will meet the demands.
Conclusively, if the construction of the houses continues at a steady pace and the buyers also wait for the market to slow down a little, it will a lot be easier to buy yourself a house in 2022 as compared to the ongoing year.
A Final Word On Housing Trends In The US
The housing market in the United States is ever-changing and we’re here to help you navigate these trends. If you need assistance buying or selling a home, let Birdnest Property Solutions be your guide. We work with real estate agents and buyers alike. We know what it takes to get top dollar for your property and can work with any type of budget so feel free to reach out today!