2022 is right around the corner, meaning buyers and sellers watching the housing market are holding their breath to see what’s next. With 2021 winding down and light breaking through the clouds caused by the Covid-19 pandemic, 2022 is shaping up to be an amazing year full of opportunities for those who want to maximize their return by selling a property and those who are ready to make a purchase.

Even though the market is buzzing with excitement at the moment, there are some signs that there could be some bumps ahead. Inflation concerns are on the rise (no pun intended) as are fears about emerging Covid-19 variants. Even though the housing market has been hot and the future looks bright, is this optimism a mirage?

The Truth About Interest Rates

To understand where the market may be heading in 2022, it’s important to first take a look at interest rates. Throughout 2021, rates have been historically low, and this has opened opportunities to first-time home buyers and property investors.

Rates can’t stay low forever, but for now, they seem to be holding steady. It is expected that interest rates could rise in 2022, but Freddie Mac predicts that the shift will not be dramatic. In fact, the current prediction for a 30-year fixed rate in 2022 is 3.7%. This remains incredibly low, and in some cases, it could offer a good time to take advantage of equity through refinance options.

Inventory and New Home Construction

Inventory of homes for sale has been a big part of driving prices higher as fewer owners have been interested in selling. Part of this has been due to uncertainty surrounding Covid-19 and its future implications, but vaccine availability combined with more comprehensive data related to Covid-19 mortality has eased fears for many sellers. With more inventory, prices may need to be adjusted downward a bit, but this simply follows the principles of supply and demand in any market economy.

Buyers have more savings than in the past, but they continue to find themselves having to engage in bidding wars due to the aforementioned low inventory. Thankfully, as inventory becomes more plentiful, this is expected to ease and buyers may have more choices. Combined with continued low-interest rates and greater savings for larger down payments, buyers are poised to be able to take advantage of exciting opportunities in 2022.

New home construction, however, remains a struggle and may continue to lag into 2022. A big part of the reason for new home construction slowdowns is the cost of materials rising as the result of supply chain breakdowns. Covid-19 placed a hold on many supply networks related to raw materials, including lumber, meaning prices have been high and resources have been scarce for many builders. As supply chain management continues to normalize, prices are expected to come back down and materials are expected to once again be plentiful.

Location, Location, Location

It’s worth noting that your location can have a great impact on the opportunities available to you. Real estate companies in Baton Rouge, for example, will be better positioned to offer guidance for Louisiana as opposed to working with a Realtor based out of Anchorage. This is why you’re encouraged to work with a local Realtor to get the most sound advice for your specific situation and needs.