All those buyers being frustrated by the bidding war and the above-list sale prices that reigned the last year’s red hot housing market was dismayed with the wait for this year.
Unfortunately for them, the new year did not bring any magic.
The Seller’s Market Is still going strong
Most of the conditions that created last year’s momentous seller’s market are still in place — most notably, supply is still way too low to meet ever-rising demand.
The 2022 housing market is tilted heavily towards the sellers — because there aren’t enough homes for sale in the housing market, and this number is getting lower with every passing day. Inventory of existing homes for sale dropped almost 20% in December. The longer the shortage of inventory stretches, the home prices will keep going up, while affordability will continue to further worsen.
Last year December saw the lowest inventory and last year itself saw the housing prices skyrocket by nearly 19% —and, while they won’t continue to rise at that unsustainable pace in 2022, they will keep rising.
The Millennials and Homes
The largest living adult generation in the US is reaching peak home-buying age just as prices soar to record highs.
Other than any catastrophic reason taking place, the prices will continue to rise because of the reason that we have the largest buying force in history entering the first-time homebuyer space — the Millennials. The average millennial is around 35 yrs old and the average first-time homebuyer is around 34 years old in this country right now, so the demand is like never before. And thus we have a supply-and-demand issue for the foreseeable future.
Thus, the entry of these large numbers of Millennials will create huge demands for first-time home buyers and will continue to exert upward pressure on home prices well into the mid-2020s. No matter what the economy does, the basic need for a home in this generational tidal wave will wash over the housing market for the entire decade to come.
The market will be maintained by the demand from these young households despite the minor increase in housing inventory. That dynamic will stall any real relief even when more homes finally do hit the MLS listings.
No new construction leads to a price rise
The wave of Millennial demand and lower inventory is keeping prices high, but so is a decade of anaemic new construction.
The supply of new houses is low because of builder demand. Over the last 12 years, the number of homes built has been far below the average. In fact, in order to keep up with the upcoming Millennial demand that was forthcoming, builders should have been averaging just over a million homes per year since 2010. However, it remained too ambitious for them and they have been far from those numbers for most of 2010 to 2020 or so, and 2021 was still a bit lower than it should have been; 2021 and 2022 are the first two years where they have been close to the number of new builds that were needed in the last 12 years. That sums up to a huge backlog and a steep gap between demand and supply. As prices continue to rise at approximately 4% to 5% every year, they are estimated to be around a 31% to 33% increase over the next five years.
On the surface, it appears that help is on the way.
Due to persistent supply-chain issues, the construction has been delayed for a close to million housing units that are currently authorized for construction or are under construction. However, we can expect that when these homes are completed in the second half of 22 and will add to inventory, it might skew the market in favor of buyers.
The data says 25% of new homes sold in December 2021 were completed homes. 46% were still under construction, while work had yet to start on 29% of homes.”
Escaping Soaring Rentals
Many buyers who were priced out of the market last year planned to rent until the storm passed. But the storm never passed with rents only going upward and are at historic highs, with prices up by more than 30% in some cities. However, the reality has forced concerned renters back into the housing market, pushing home prices up even further. chaos
Apparently, the mortgage rates and rising prices might pose financial issues however the rising rents, which are expected to climb by 7.1%, will be a powerful inducement for many would-be first-time homeowners to buy a home.
It’s a testing time — But as Good a Time as Any
Most people have seen rising prices and now seeing the rising interest rates and might think it’s a bad time to get into the market. And, as a general rule, home values appreciate over time and inflation ticks up, which implies prices are always rising and thus inflation is growing. So the waiting theory always hurts and never helps.
Prices are rising and will continue to do so — but that will be good news for you once you’re all moved in. Since post that you will see the prices are still rising.
Even if the market cools later this year or next year, prices aren’t going to drop — they’re just going to rise by less. It will never be cheaper than it is right now.
So, there’s no perfect time to buy or sell a property. In the long run, real estate only trends upwards, you can’t time the market and thus it’s never good to wait in order to beat the market.
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