- After a wild market in spring of 2021, inventory and prices are moving toward more sustainable levels.
- While home price growth is slowing, affordability may be impacted by rising interest rates in 2022.
- Sellers continue to hold an advantage, but they still need to stage and improve their homes to earn the best price at closing.
- Some COVID-era trends, including home offices, flexible spaces, and outdoor space, will be in demand long after the pandemic is over.
Sharry Schmid, president, Edina Realty
As president of Edina Realty, Sharry Schmid provides guidance and direction to over 2,300 REALTORS®.
In the spring of 2021, the housing market experienced frenzied activity, due to pent-up buyer demand and the effects of persistently low inventory levels. Some buyers, particularly those looking for starter homes, found themselves losing bid after bid, while sellers were reporting bidding wars on homes that had been listed for mere hours. Since then, this level of competition has moderated some, but we are still far from equilibrium.
While no one can predict the future, most housing experts are in agreement on a few key factors. Here’s what buyers, sellers and homeowners can expect from the housing market in 2022.
Home buyer expectations
Overall, buyer demand will continue to out-pace the supply of available homes for sale. Buyers should be prepared to be patient as they make offers on homes in their desired areas and price points.
- Inventory will continue to rise, slowly. While we still expect 2022 to remain a sellers’ market, buyers should face less competition than they did in 2021.
- Prices will continue to rise, but experts agree that the growth will be more tempered. Most economists are predicting a price growth of between 5-9%. By contrast, home prices rose nearly 16% in 2021.
- Interest rates are likely to increase this year, due to inflationary pressures in the broader economy. If this happens, buyers will have to shift their budgets. When interest rates go up, those applying for a home loan will see their buying power diminish.
- Home affordability will continue to be an issue for many would-be buyers who are priced out of the market, especially if interest rates rise. The median sales price in our 13-county metro market in October 2021 was $340,000. Wisconsin buyers, depending on their location choice, may see homes at lower price-points. The median home price in October 2021 across the state of Wisconsin was $245,000; western Wisconsin saw a median home price of $249,900.
- New construction is on the rise, but worker shortages, supply chain issues and the rising costs of construction mean that new developments will not be the solution to our low inventory issues.
Home seller expectations
For sellers, the forecast continues to look pretty sunny. However, sellers should remember that the market has slowed since its 2021 peak.
- The pace of the market will remain fast, but likely less frenzied than it was in spring of 2021. It may be important to remember that having a house on the market for a few weeks is normal, and may not necessarily indicate the home is priced incorrectly.
- Bidding wars may still happen for homes in stellar condition or in highly sought-after neighborhoods. Sellers should work with their REALTOR® so they have an understanding of the demand for similar homes in their area.
- Home improvements, even in a strong seller market, are still a smart idea. Many of today’s buyers have been waiting years to purchase, but they are not willing to lower their expectations even after years of patience. It’s important that homeowners recognize they will either pay to improve the home before selling, or will have to factor in a lower selling price at closing.
While we are not out of the pandemic, some trends that began with COVID-19 are here to stay. The primary trend is the growing desire to move further away from the urban core and to expand on outdoor space, which is a reversal from the demand we saw in inner-ring suburbs over the last decade.
- Green space and privacy are still wildly desirable to homebuyers and homeowners, who now understand just how important that extra outdoor space can be.
- Work-from-home and hybrid jobs are also spurring homebuyers to look at homes in more distant locations, because they no longer have to factor in a daily commute.
- Flexible spaces and bigger footprints are, not surprisingly, still in high demand as parents remember the stress of distance learning and at-home officing in tight quarters.
- Second homes and lake homes continue to be popular, but today’s buyers are asking more questions about the wifi service in rural areas than ever before. For those who have the ability to work remotely, these homes could be an ideal location — if the connection is right.
Buying or selling in 2022?
Edina Realty has more than 2,300 local market experts who help buyers and sellers in every city across Minnesota and western Wisconsin – and network with each other each and every day. If you’re considering buying or selling in the next year, reach out to start the process.