These past couple of years have seen unprecedented highs and lows in real estate – stratospheric rises in home prices on one side, and record low mortgage rates and available homes for sale on the other side. So the question is whether this is going to continue or if we’ll be seeing a change in 2022. Part of that answer depends on where you live. Here in Silicon Valley, with such an extreme housing shortage, I can’t imagine any cooling down of the market any time soon.
Many housing experts are saying that the market is going to slow down a bit in 2022, however that doesn’t mean prices won’t be going up. They just believe they’ll be going up at a less frenetic double digit pace. Interest rates are planned to go up while there will continue to be a shortage of homes. This will continue to leave buyers frustrated in not being able to find the right home in the right location at the right price.
With plenty of investors jumping in to buy single family homes and the more than 45 million millennials (ages 26-35) now being in their prime homebuying years, we need substantially more homes. The Great Recession caused builders to stop building, and according to Realtor.com Chief Economist Danielle Hale,
“The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high.”
So what are the economists saying about home price appreciation in 2022? Their forecasts range from 2.8% to 11%. This is a national average, and as we’ve seen here in Silicon Valley, we tend to be on the high end of these national averages.
- Zillow – 11%
- Fannie Mae – 7.4%
- Freddie Mac – 7.0%
- MBA – 5.1%
- HPES – 5.1%
- Zelman – 3.0%
- Realtor.com – 2.9%
- NAR – 2.8%
Another interesting forecast for 2022 is where people are buying homes. We hear a lot about people leaving Silicon Valley for other less expensive areas within California and across the nation, but that doesn’t mean people aren’t moving into Silicon Valley. The economy in Silicon Valley is strong and the lifestyle here is highly valued. Plus there’s the weather with 260 sunny days a year with temps that rarely drop below 35 degrees. It’s no surprise then that San Jose made Forbes “Hottest Markets” for 2022. The other markets included McKinney, TX; Buffalo, NY; Cary, NC and Bellevue, WA.
Technology will continue to have an integral part in home buying in 2022 as it has this year. It’s sped up the home buying process, which then enabled buyers to jump quickly on whatever home comes up for sale, sometimes in hours! If a home is priced well, in good shape and in a good location, economists expect this speedy purchase process to continue. Here’s what Hale said about this:
“Homes are selling so much faster than they have in any previous (years).”
Additionally, the move to the suburbs where there’s more space, larger homes, bigger yards and a lower price is expected to continue it’s popularity into 2022. This trend was accelerated by some of the aging millennials trying to grapple with the realities of doing more than ever before – all from home. With the pandemic continuing to exert it’s force on our lives with renewed vigor, remote working or telecommuting only a few days a week provides more comfortable options outside of cities. In the suburbs, buyers can get a larger home with a home office at an attractive price.
Lastly, we can’t uncouple interest rates from home sales as the majority of home buyers will need a mortgage. Mortgage rates are expected to rise along with home prices next year. Some economists think rates may go as high as 4.0% next year. The infographic below provides a few details about these market predictions and here’s what experts project for 2022, forecasting that buyer demand will remain strong as people try to capitalize on rates and prices before they climb, creating another strong year for home sales.
Bottom line, buyers will still have a challenge purchasing a home and it will continue to be a sellers market into 2022.
Check out the infographic below and let’s connect so you can make your best move in the new year.