With 2022 just about here, it’s time for us to look ahead and forecast what we anticipate will happen in Real Estate. Here are the top 5 things to watch in our local market this coming year.
1 – Mortgage Interest Rates
A year ago we were looking around 2.75% for most interest rates and then we saw even further decline before slowly rising to where we stand today just over 3% for many. Although not for all as a client of ours just locked in 2.6% for a VA Home Loan.
Just two years ago we were in the 3.75% range and many forecasts seem to predict that’s where we will end up close to by the end of 2022. Time will tell, but it’s something to watch due to the quick rise in prices and how interest rates can impact overall affordability with relation to the monthly payment. I do not anticipate any drastic changes, but rather slow movement over time.
2 – Pricing
For many, values appreciated 28% or so during 2021, which is HUGE for a one-year sample. We are not expecting a repeat performance in 2022, but we do think growth in the 5-7% wouldn’t be unreasonable to see. However, the shortage of inventory and influx of buyers from afar can cause drastic measures to secure a home so anything is possible.
The wild upswing in pricing brought appraisal waivers, long (free) leasebacks for sellers and many other wild terms to make a buyer’s offer stand above the rest. This really hindered the first-time buyer segment so hopefully that portion can rebound and get into our housing stock during ’22. The entry level into housing sits pretty close to $350K in most areas now.
3 – Inventory
This was #1 on the 2021 list and for good reason… we saw our lowest inventory figures ever this year. March being the low point with only about 2,400 Active Homes for Sale throughout Maricopa County.
We currently sit around 3,900 and one year ago we entered 2021 with 3,467 so starting slightly higher this time around. New construction is in full swing, but not enough to satisfy all the demand.
Let’s hope more private & institutional investors will decide to sell off some properties for owner-occupants to take advantage of.
4 – New Construction
Still sitting at #4 this year… new construction is a hot topic. As touched on in #3 above, we need more new homes to satisfy demand. Most new home communities currently have 3-6 month waiting lists for their homes and then a 7-8 month build time on top so it’s taking close to a year for each home purchase to come to fruition. That’s double what we were seeing just a few years ago.
As stated many times before, a lack of trades and some shortages in materials have caused this. Anyone looking for work… look into construction!
Not just homes, but as you drive around, there are countless apartment complexes under construction along with commercial development.
On a positive note, we don’t foresee lumber prices being so insane this coming year.
5 – Strong 1st Half… Flatter 2nd?
This is more of an estimation… personally, I feel that the first 6-months of 2022 will be strong with lots of activity from both buyers & sellers. However, a gut feeling tells me the second half of the year will be a little less active. I do NOT anticipate a crash, big slide back or even downward pricing trends, but I feel like there could be some resistance in the market as prices escalate further and interest rates gradually rise, when combined with external inflation.
All things considered, 2022 should be a good year for local real estate and hopefully a little less chaotic!