What’s going to happen to the Huntsville housing market in 2022?
Matt Curtis breaks down his 2022 housing market predictions. While our crystal ball is broken we are ready to jump into the data to draw a conclusion together on where prices are headed in 2022.
Let's Recap 2021
This past year we saw the demand for housing continue to exceed the supply. This was a direct result of the US under building by 4 to 5 million + homes after the 2008 recession. As of 2020 Freddie Mac estimated that the US was still short by 3.8 Million homes. Demographic expert Ken Gronbach estimates that number could be as high as 25 million
Because of this the last two years in housing have been anything but typical. We saw homes appreciating at an average of 19% in 2021 and 74% of homes for sale this past year had multiple offers according to Redfin.
If demand continues to outweigh supply in 2022, that could contribute to a sellers market continuing into the new year. Of course there are other factors at play.
What's In Store for 2022?
Many people are concerned about inflation as prices surge across the country. The one thing we know about housing is that it acts as a hedge against inflation. In the 1970’s, inflation was 7.1% and home prices rose 9.9% per year. We’re hopeful this is a good indication that we will continue to see a strong real estate market.
As far as Huntsville, we anticipate we will continue to see growth as the job market continues to grow. Mazda and Toyota are building a new manufacturing facility here and we also have the FBI, Blue Origin and our team continuing to grow and add jobs to the workforce.
There’s a wide range of predictions regarding how much homes will appreciate in 2022 - ranging from 16% appreciation which Goldman Sachs predicts to 1.9% from CoreLogic. All of these predictions are lower than the average 19.2% appreciation for 2021 but the predictions for continued appreciation does show a level of optimism for the real estate market as a whole.
We anticipate another strong year for real estate in 2022 but of course there are factors that will contribute to the trajectory of the market in the upcoming year. Let’s look at a few of those now:
What Factors Will Impact Housing in 2022?
The first factor is the number of homes purchased in 2021 by investors. 18.2% of homes purchased in 2021 were purchased by investors, which was likely a play on yield spreads between high appreciation and low mortgage rates. This could continue to fuel further price appreciation, but could also cause the inverse if institutional investors started dumping their inventory.
The second is mortgage rates. Many people are predicting a 1/2% to 1% increase in rates in 2022 however, that number varies greatly depending on the source. The mortgage bankers association is predicting a 4% rate by the end of 2022 and as high as 4.3% by the second half of 2023. Fannie Mae is predicting rates at 3.4% but stated that they could go higher if inflation is not “transitory.” Rates could also stay flat as we continue to see more variants of the COVID-19 virus.
A delicate balance exists between interest rates, increased prices and homes purchased. The question is, at what point do increased rates and home prices impact the # of units purchased as homes become less affordable across the country. The good news is, this could be a short term gain for Huntsville, as our median price is still ~ $50K - $80K below the national average.
A 3rd factor is the current supply chain shortages. These shortages could continue to increase commodity prices and delay new home inventory. The great resignation could have a strong impact on the housing market, among many other things in 2022 if we don’t see a positive shift here.
Another factor to consider is the number of loans in forbearance. There are currently 1.01 Million loans still in forbearance as of November 2021. This could affect inventory if a large number of these homes go on the market. With the current demand level, this new inventory would likely be consumed quickly and could shift the scale slightly from the historical sellers market we’re used to.
The final factor is the huge shift to work from home. We’ve already felt the impact of companies allowing workers to work remotely as there has been a mass exodus from expensive cities to locations with a more affordable cost of living. We’ll continue to see this migration if companies decide to let their employees work from home permanently. With Huntsville’s low cost of living, we anticipate people will continue to find Huntsville an attractive alternative to bigger cities.
Are There Risks or Rewards To Selling This Year?
All of these unknowns could directly impact the real estate market in the upcoming year. To what extent, we can’t know for sure. While we wish we knew exactly what to expect in 2022, we do know that we can evaluate risks and rewards on both sides of the coin.
If you’re contemplating purchasing, let’s look at your risks.
There is a risk of purchasing if home values take a cyclical dip. However, this risk is slightly mitigated because unlike 2008 mortgage borrowers are qualified and meeting sound borrowing criteria to fund home loans.
There’s also a risk of not purchasing a home now as homes continue to quickly appreciate due to the lack of inventory and inflation. This makes it possible to quickly gain equity in any home that you do purchase.
Real estate is still the best way to build wealth and we think we’ll continue to see a strong market in 2022! The best thing you can do looking ahead is know your options and plan accordingly. If you have questions and would like to discuss your unique situation and options available to you, contact us for a free, no obligation consultation.
Posted by Matt Curtis