Will COVID-19’s Omicron Variant Infect the Housing Market? Or Is Real Estate Immune?

Omicron Variant

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News of a dangerous, potentially more transmissible new COVID-19 variant has shaken the financial markets to the core, resulting in international travel bans and renewed fears for the pandemic-weary population around the world.

But will omicron, discovered in the U.S. last week, infect the housing market?

The fear is that vaccines and antibodies acquired after infections may not be as effective against the variant. Moderna’s chief executive told the Financial Times he didn’t think his company’s vaccine would be as powerful against it as it was against the delta variant. The same day Regeneron said its antibody treatment may have to be updated to better fight the virus.

If those worries are confirmed, real estate experts believe omicron could worsen the already thin supply of homes for sale, affect mortgage interest rates, and ultimately result in higher rents in some parts of the country and lower rents in others. But it will be weeks before scientists understand how the vaccines, antibodies, and treatments stand up to omicron.

“Right now, we are looking at pretty severe reactions to the omicron news in the stock market,” says Tomas Jandik, a finance professor at the University of Arkansas in Fayetteville. “The residential market may be more immune to COVID because of what we have already seen in the past waves of the virus.

“People need to live somewhere.”

The discovery of the variant has led to steep drops in the stock market. The S&P 500 had its worst day since February, falling 2.3% on the day after Thanksgiving. The ups and downs have continued, as it lost almost 1.2% after the first case was confirmed in the U.S. on Wednesday.

Realtor.com® Chief Economist Danielle Hale believes omicron could lead to a continuation of the housing trends that have been playing out during the pandemic. Inventory is likely to remain scarce, prices will stay high but the growth in them will slow, and the popularity of the suburbs will endure.

“My expectation is omicron will have just a small effect” on the housing market, says Hale. “If you look at what happened with delta, there was a bit of a drop-off in listings at least temporarily. It will be somewhat similar [with omicron]. Some sellers might say, ‘Hey, let me wait for the wave of this pandemic to pass.’”

It likely won’t result in another temporary shutdown in the housing market, the likes of which were last seen in March 2020, followed by a frenzy resulting in double-digit price hikes and out-of-control bidding wars.

“I don’t think the impact on the housing market and the economy will be as severe as when COVID-19 first hit,” says Gay Cororaton, a senior economist at the National Association of Realtors®. “This time the economy is better prepared. People are already working from home. We’ve seen a rise in online services and deliveries.

“It could stall … the economy, but it will not create a deep downturn that [COVID-19 initially] had,” she says.

What could omicron mean for buyers and sellers

The uncertainty surrounding the variant “could force some people into paralysis and hibernation,” says Norman Miller, a real estate and finance professor at the University of San Diego. If omicron proves to be dangerous, it could push some potential home sellers to hold off and hunker down instead and buyers to wait out the worst of it.

But the pandemic is no longer new and the buying and selling process has already made necessary adjustments. So homebuyers may be more willing to continue looking—and to ultimately purchase a home.

“We’ve had a year and a half to practice virtual tours … and marketing. Some Realtors have learned to take their phone and go give a tour and let the buyers stay home,” says Miller. “We’ve taken some of the fear out of the process.”

On the flip side, omicron could wind up juicing demand for homes, particularly if it’s more dangerous than recent variants.

People could go back to working from home, and returns to the office may be delayed further, leading folks to want more space once again. It could also result in additional homebuyers feeling more comfortable moving farther outside of cities where they can get more house and property for their money.

“People are going to be looking for houses where they can work from home,” says finance professor Jandik. And if fewer sellers list their properties and demand rises even more, that could lead to prices surging once again.

Even with the severe housing shortage, the pullback in inventory may not be as disruptive as the holiday season and winter months are normally a slower time anyway. The next rush of homes isn’t expected to go up for sale until the spring. The hope is the variant won’t be a threat by then.

“I don’t foresee a pullback in buyer activity, transactions, or interest,” says James Monastero, the branch manager at the lender HomeVantage Mortgage in Raleigh, NC. “If they weren’t bothered last year, they aren’t going to be bothered this year.”

Mortgage rates could be affected by the variant

The big variable in the housing market is mortgage interest rates. Rock-bottom rates over the past year have helped to offset the steep home price increases, making monthly payments more viable. Rates had already been expected to rise going forward. Yet, the fear surrounding this latest COVID-19 variant could evolve into temporarily lower rates or rates may not rise as much as previously anticipated.

However, for now rates are expected to go up in the new year. And that means the party for home sellers expecting bidding wars with multiple offers over asking price will likely be coming to an end—or at least slowing down substantially.

“If mortgage rates go up, that’s the X factor,” says Jandik. “That may lead to a slowdown in demand because people may not be able to afford high-priced houses if their mortgages are going to be more expensive.”

Rates aren’t likely to fall much further as the government is winding down its support of the mortgage market. Lenders typically bundle mortgages together and sell them to investors to free up cash to make new loans. The federal government had been buying large numbers of those mortgage-backed securities, also known as mortgage bonds. But those purchases will be tapering off.

“It’s pretty hard for mortgage rates to go down with the government buying fewer of the mortgages out there and artificially supporting the low rates,” says real estate professor Miller.

However, investors typically put more money in bonds, including mortgage bonds, when the stock market is volatile—as it is right now following news of omicron. That could help to curb rates from rising too much—at least in the short term.

“As the uncertainty goes away, mortgage rates will go higher,” says Hale.

Then there’s the other matter of high inflation roiling through the economy. The average mortgage rate was just 3.11% in the week ending Dec. 2, according to Freddie Mac. That’s much lower than inflation.

With the Consumer Price Index hovering around 6.2% in October, lenders are likely to want more of a return on their investment, says Miller. That will likely result in higher rates.

“Rates are going to go up. The question is by how much,” says Miller. However, “the chances of a rapid increase in mortgage rates is very low.”

At the start of the pandemic, many big-city residents who could afford to trade their tiny apartments for larger homes in the suburbs and beyond did so. But with the availability of vaccines and waning hospitalizations and death rates, some returned and other folks moved back in. Prices have rebounded for the most part, and rents are soaring.

It’s not clear if omicron could derail that progress, making the crowded urban areas less desirable yet again.

“In the near term, it reinforces work from anywhere. It does delay the return to offices,” says Mark Zandi, chief economist at Moody’s Analytics. “It reinforces the reasons people moved from the cities to the suburbs and exurban areas and smaller cities.”

“People have started returning to the cities. That could stall,” says NAR’s Cororaton.

On the sale side, most of the city denizens who were going to purchase another home in the burbs or the country already did so. That means another real estate rush outside of the cities isn’t likely. Instead it may result in the status quo with big houses in the suburbs remaining desirable with homebuyers.

“COVID is a big risk factor for the overall economy, but it’s less of a risk factor for the residential [housing] market,” says finance professor Jandik.

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Millennials Eye the Mobile Home Market Amid Record-High Housing Prices

Mobile Homes

Realtor.com

With home prices surging, many buyers, particularly millennial first-timers, are seeking out more affordable housing. And that means taking another look at alternatives like mobile homes.

Yes, mobile homes often get a bad rap. But their values have been rising faster than single-family homes, according to a recent report from online financial services marketplace LendingTree. These homes have become even more appealing recently as they support the on-the-go, work-from-home lifestyle during the COVID-19 pandemic.

“Because single-family home prices are so high, some middle-class buyers—especially younger ones—could increasingly turn to mobile homes,” says LendingTree senior economic analyst Jacob Channel. “Even though the value of single-family homes is rising very quickly, the lower price point of mobile homes allows for an even faster ascent.”

LendingTree compared the median prices of mobile homes and single-family homes in all states except for Hawaii using the most recent U.S. Census Bureau data available between 2014 and 2019. Analysts found that while mobile homes are far less expensive than single-family homes, their median values escalated faster in 27 states than that of single-family homes over the same five-year period.

The median value of a mobile home was $53,300 and they have appreciated 39% from 2014 to 2019, according to the report. That’s 6 percentage points higher than the median appreciation of single-family homes. And mobile homes are a fraction of the price, costing about $190,000 less than single-family homes.

“Millennials are definitely getting priced out of the current real estate market,” says Jason Dorsey, a generational expert at the Center for Generational Kinetics, which does market research on millennials and Generation Y.

These folks may be experiencing bidding war fatigue as they compete for and often lose out on properties in today’s seller’s market.

“We’re seeing a lot of pressure on millennials to come up with even larger down payments as well as the higher monthly mortgage and holding costs,” adds Dorsey.

The most affordable mobile homes are in Nebraska, where the median home value is $21,800 appreciating by 8% over the past five years. That’s compared with a median of $172,700 for single-family homes in the state, where homes are appreciating by an eye-popping 29%.

Iowa had the second lowest-priced mobile homes, with median values of $23,300 with 15% appreciation.

“Millennials are taking a new interest in mobile homes because it fits their remote or hybrid work lifestyle as well as potentially giving them more options for green space and flexibility of geography,” says Dorsey. “We expect this trend to continue as long as home prices stay elevated and hybrid or remote work continues to be an option.”

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A Florida Mansion Nancy Pelosi Did Not Buy Is the Week’s Most Popular Home

Most Popular Homes

Realtor.com

Rumors fueled clicks on Realtor.com® this week. Our most popular property by far was a $25 million oceanfront estate in sunny Florida that became a quick (and admittedly odd) internet sensation.

As for why this luxurious place was so darn popular? Well, it was the result of fake news. Last week, speculation swirled that Speaker of the House Nancy Pelosi was the buyer of this magnificent mansion in the Sunshine State. Social media went wild with the idea of a stalwart Democrat buying an extravagant residence in a Republican-led state.

One problem: It just wasn’t true; Pelosi’s office denied the rumors. Still, fueled by public outrage and curiosity, the Florida mansion she didn’t buy racked up the most clicks this week.

Also drawing curious clickers was another swanky Florida estate. The Palm Beach estate known as Tarpon Island is currently the most expensive listing in the country—priced at an astounding $210 million.

Other popular properties for sale this week include a former library in Indiana with an exquisite brick and stone exterior as well as a Michigan mansion ready for any doomsday prepper with deep pockets.

Let’s focus on the facts and enjoy all 10 of the week’s most popular properties.

10. 290 Crosman Ter, Rochester, NY

Price: $259,900 (listed on Nov. 24, now off-market)
Why it’s here:
Storybook style continues to make buyers swoon. This charming three-bedroom Tudor barely lasted a week on the market before a deal was struck.

Built in 1900, the 1,701-square-foot home features original gumwood trim, hardwood floors, arched doorways, and leaded-glass windows. An updated kitchen really shines, and the living room comes with a cozy wood-burning fireplace.

Rochester, NY
Rochester, NY

Realtor.com


9. 16651 Rembrandt Rd, Loxahatchee, FL

Price: $1,995,000
Why it’s here:
Known as You Farm, this 4-acre property features a lovely two-bedroom barndominium and a greenhouse. There’s potential for this property to transform into a world-class equestrian facility. Close to town and accessible by paved roads, this farm also comes with several buildings as well as two outdoor pavilions.

Loxahatchee, FL
Loxahatchee, FL

Realtor.com


8. 10257 Crase Rd, Battle Creek, MI

Price: $5,600,000
Why it’s here:
Prepping in luxury fashion. This self-sustaining country estate was built in 2018 and sits on more than 193 acres. Most importantly, it features a 5,000-square-foot bunker to retreat to if things truly go south.

The five-bedroom, three-level, 8,364-square-foot main house sits off the road and welcomes guests with a decorative water fountain. Besides the bunker, the estate includes a stocked, 9-acre private lake; a three-bedroom caretaker’s house; a 7,200-square-foot outbuilding; and a greenhouse.

Battle Creek, MI
Battle Creek, MI

Realtor.com


7. 10 Tarpon Isle, Palm Beach, FL

Price: $210,000,000
Why it’s here:
It’s the country’s most expensive listing—and the only private island in Palm Beach. Tarpon Island was sold for $85 million just four months ago. Its current sale price will cover a complete makeover of the mansion currently on the property.

Palm Beach, FL
Palm Beach, FL

Realtor.com


6. 795 Laurelwood Rd, Kettering, OH

Price: $399,000
Why it’s here:
Custom-built in 1959, this three-bedroom midcentury marvel offers 3,096 square feet of living space.

Pecky cypress woodwork, original parquet floors, and a 3,000-square-foot walkout basement are just a few of the highlights of this home once owned by a well-known town doctor.

Kettering, OH
Kettering, OH

Realtor.com


5. 705 Washington St, Beaufort, SC

Price: $2,650,000
Why it’s here:
Known as the Elizabeth Barnwell Gough House, this stately residence has been fully restored by “true preservationists.”

Built in 1789, the three-bedroom home already has an offer in place after just a couple of weeks on the market.

Beaufort, SC
Beaufort, SC

Realtor.com


4. 5 Sherwood Dr, Falmouth, ME

Price: $319,000 (listed on Nov. 25, now off-market)
Why it’s here:
Another example of a charming home moving quickly in today’s fast-paced market. After a week, an offer is in place for this adorable abode.

This colorful blue and yellow beauty was built in 1850 and has been perfectly preserved in all the right places, including the wood floors, antique stove, and beamed ceilings.

Location is also a plus: The two-bedroom home on a half-acre is in a desirable neighborhood.

Falmouth, ME
Falmouth, ME

Realtor.com


3. 124 E Rush St, Kendallville, IN

Price: $250,000
Why it’s here:
Check this place out! Built as a Carnegie library in 1920, it has had some conversion work done, but there’s still plenty to do. Zoned for commercial and residential use, this 4,464-square-foot space is currently configured with four bedrooms and four half-bathrooms. A beautiful brick and fieldstone exterior is well-preserved and makes for plentiful curb appeal.

Kendallville, IN
Kendallville, IN

Realtor.com


2. 6556 Rosendale Rd, Wayne, OH

Price: $999,900
Why it’s here:
Make it a log cabin, but luxurious! With two stories, cathedral ceilings, large windows, and an array of upgrades, this home allows you to soak in the great outdoors without sacrificing comfort.

Full of rustic appeal, this six-bedroom, 6,782-square-foot retreat sits on 11 acres with a pond and two barns.

Wayne, OH
Wayne, OH

Realtor.com


1. 429 S Beach Rd, Hobe Sound, FL

Price: $25,000,000
Why it’s here:
Rumors circulated that Speaker of the House Nancy Pelosi was buying this oceanfront mansion. There is an offer in place for the home, the listing agent tells us, but it’s not from the California congresswoman.

The palatial estate was built on 2.37 prime acres on Jupiter Island in 1995. The two-story main house offers over 10,000 square feet of luxurious living space with an elevator, home theater, and room for entertaining on a grand scale.

Hobe Sound, FL
Hobe Sound, FL

Realtor.com

The post A Florida Mansion Nancy Pelosi Did Not Buy Is the Week’s Most Popular Home appeared first on Real Estate News & Insights | realtor.com®.

Despite Low Mortgage Rates, America’s Housing Market Keeps Many First-Time Buyers on the Sidelines

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There’s been a rebound in home-buying demand in recent weeks, as evidenced by mortgage application data. But first-time buyers aren’t behind the surge.

The latest data from the Mortgage Bankers Association, for the week ending Nov. 26, showed that overall mortgage applications dropped 7.2% on a weekly basis. But loan applications for mortgages meant to purchase homes increased by 5.1% week-over-week, building on the previous week’s 4.7% uptick.

Overall, in November, mortgage applications for loans intended for purchasing homes increased by 7% in November, according to an analysis from Joshua Shapiro, chief U.S. economist at MFR Inc. That’s compared with a 1% decline in October and an 8% gain in September. But when diving deeper into the data, it’s clear that not all buyers are flocking back to the market in similar numbers.

‘As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity.’

Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association

“As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity, while the share of first-time buyer activity remains depressed,” Joel Kan, associate vice president of economic and industry forecasting for the Mortgage Bankers Association, said in the trade group’s latest report.

Evidence for this can be seen in a number of data points, including the share of applications for mortgages backed by the Federal Housing Administration. FHA loans can be a useful proxy for first-time buyer demand, since they require smaller down payments and lower minimum credit scores than loans backed by Fannie Mae and Freddie Mac.

In the most recent week, FHA loans made up only 9.4% of overall purchase loan applications, down from 10.2% during the same week in 2020.

The number of first-time buyers increased last year

Over the past year, the share of buyers who were purchasing their first home actually increased, according to recent data from the National Association of Realtors, rising from 31% to 34%. Despite the increase, the figure remained well below the historical norm of 40%.

And those first-time buyers that managed to achieve that milestone did so in spite of many obstacles. “This year has dealt several headwinds for many of them,” said George Ratiu, manager of economic research at Realtor.com.

“The early part of 2021 saw an overheated market, in which pandemic-accelerated demand for homes ran headlong into a market starved for inventory, due to over a decade of underbuilding,” he added. As of the mid-point of 2021, there was a shortage of around 5.2 million homes, based on analysis from Realtor.com.

‘Even with low mortgage rates, many first-time buyers found it difficult to compete with repeat buyers.’

George Ratiu, manager of economic research at Realtor.com

“Even with low mortgage rates, many first-time buyers found it difficult to compete with repeat buyers bringing equity from a prior home, or other buyers leveraging all-cash offers,” Ratiu said.

So far this fall, the housing market has cooled from the crazed pace earlier in 2021, while maintaining a higher rate of home sales than is typical for this time of year. But inflation has put a dent in would-be buyers’ wallets—particularly when it comes to the rising cost of rent. According to the National Association of Realtors, 73% of first-time buyers over the past year were previously renters.

Plus, mortgage rates have risen above the ultra-low levels seen at the beginning of 2021, and most economists expect they will rise as the Federal Reserve eases off its pandemic-related stimulus.

“Millennials are in the market, but more of the success in actually buying a home is coming from those with larger budgets—they can beat out bids and have more inventory to choose, especially for new homes,” said Adam DeSanctis, director of public affairs at the Mortgage Bankers Association.

First-time buyers’ success might depend on whether the inventory situation improves. Ratiu said that more homeowners are expected to list their homes for sale in the coming months, which would give buyers more options and put a damper on the high rate of home-price growth. If that expectation doesn’t come to fruition, success could end up being a reflection of which buyers have access to financial assistance.

According to the National Association of Realtors, between 2020 and 2021 more than 1 in 4 first-time buyers used a gift or loan from friends or family for their down payment.

The post Despite Low Mortgage Rates, America’s Housing Market Keeps Many First-Time Buyers on the Sidelines appeared first on Real Estate News & Insights | realtor.com®.

The Most Popular Holiday Decorations in Every State—Can You Guess Yours?

Popular Holiday Decorations

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Americans are getting ready to deck the halls early this year.

The weekend after Thanksgiving stands as the most popular time to hang up holiday decorations, a new survey suggests. And after last year’s somber holiday season amid COVID-19, plenty of folks seem eager to invest in new baubles—although where someone lives may play a big part in determining their favorite decorations.

Christmas trees, lights, nativity scenes, wreaths, and garlands are among the most sought-after decor, according to a recent survey from Shelby Township, MI–based builders Lombardo Homes. In some states, folks preferred more classic snowflakes while in others the Grinch was the most searched for holiday decor.

The report was based on an analysis of more than1,500 Google search terms related to Christmas decorations. More than 1,000 Americans were also asked about their Christmas decorating habits.

“We know this is going to be a very special Christmas season because of what was happening last year with the pandemic,” says Andy Kerns, a creative director at marketing agency Digital Third Coast who led research for the report.

Many folks scaled back on big celebrations with loved ones to be cautious, says Kerns. This year “people are really eager to get the season started.”

Making the season brighter is the name of the game for families decorating for the holidays in the age of the vaccine and recent FDA approval of coronavirus booster shots for adults. Folks spent an extra $70 on adornments during the holidays, according to the survey.

“I’m still getting the residential clientele that just wants things over the top,” Denise Piccolo, a New York City–based interior designer, tells Realtor.com®. “A lot of people are telling me their children are coming back and they want that traditional Christmas: the Christmas tree, the reindeer, the garland.

“Never before have people asked me for so many Santa statues,” she adds. “Everyone is trying to get back to that feeling that we all lost last year. There was such a separation that people are longing for the nostalgia of old-time Christmas.”

The report, which tracked the most popular holiday decorations by state as indicated by Google search data, nonetheless included a few surprises. Apparently, the Grinch is more popular than both Santa and Frosty in large swaths of the country. A Yuletide upset! The Grinch beat out the humble snowman, Santa, reindeer, gingerbread, and the nutcracker in the ranking of most popular Christmas decorations in states such as Texas, Nevada, Arizona, and Kentucky.

Expect a gingerbread-laden Hawaii, window candles in New England, and more traditional decorations throughout the Southeast. Nearly all Americans polled seem to get into the holiday spirit, with 94% saying they celebrate in some way and 84% saying they decorate.

“People are eager to show off their Christmas spirit to neighbors,” says Kerns. “It’s not just about putting up a tree in the family room. Half the people we polled are putting things up outdoors, on their house and lawn.”

Alabama: Tree
Alaska: Wreath
Arizona: The Grinch
Arkansas: Tree
California: Lights
Colorado: Lights
Connecticut: Window lights
Delaware: Window candles
Florida: Tree
Georgia: Tree
Hawaii: Gingerbread
Idaho: Lights
Illinois: Lights
Indiana: Nativity scene
Iowa: Snowman
Kansas: Nativity scene
Kentucky: The Grinch
Louisiana: Nutcracker
Maine: Window candles
Maryland: Garland
Massachusetts: Window candles
Michigan: Snowman
Minnesota: Snowflake
Mississippi: Star
Missouri: Lights
Montana: Snowflake
Nebraska: Snowflake
Nevada: The Grinch
New Hampshire: Wreath
New Jersey: Santa
New Mexico: The Grinch
New York: Angel
North Carolina: Star
North Dakota: Nativity scene
Ohio: Snowman
Oklahoma: Tree
Oregon: Lights
Pennsylvania: Window candles
Rhode Island: Reindeer
South Carolina: Garland
South Dakota: Candy Cane
Tennessee: Tree
Texas: The Grinch
Utah: Nativity scene
Virginia: Wreath
Vermont: Garland
West Virginia: The Grinch
Washington: Lights
Wisconsin: Gnome
Wyoming: Garland

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Will Home Prices and Rents Finally Fall? Our Bold Predictions on What’ll Happen in Real Estate, 2022

2022 Forecast

Realtor.com / Getty Images

What to Expect In 2022.

Realtor.com

Here’s what we already know: Since the COVID-19 pandemic began, the real estate market has been on a wild ride of unprecedented highs and lows—record-high home prices on one side, record-low mortgage rates and available homes for sale on the other. It’s been a time of overwhelming stress for many, gigantic profits for some, and great disorientation for most of us.

Now the housing experts say the market is “normalizing.” But what does that mean? Will home prices and rents finally come down? Will more homes go up for sale? And what does the year ahead have in store for the real estate market?

The Realtor.com® 2022 housing forecast anticipates the market will continue slowing down from the frenzy seen in the spring when prices shot up to new heights. However, prices will stay high, inventory will remain tight, and mortgage rates will rise.

The bottom line: Even as the market calms down further, it’s still expected to be challenging for buyers, especially those purchasing their first homes.

“The 2022 housing market will continue to be a seller’s market with fast-moving homes and rising prices,” says Realtor.com Chief Economist Danielle Hale. “But the competition should be a bit less intense than we’ve seen recently.”

Home prices will stay high, but price growth will continue slowing

Home prices aren’t expected to keep zooming up into the stratosphere in 2022 the way they did this year. So buyers can breathe at least a shallow sigh of relief. Instead, Realtor.com economists anticipate they’ll increase at a much slower rate of just 2.9% over this year compared with an anticipated 12% rise in 2021.

This means the double-digit price growth that confounded buyers earlier this year is expected to taper off.

However, prices aren’t anticipated to come down from the highs they reached this year due to the continuing shortage of properties for sale and hordes of buyers continuing to enter the market. They just won’t go up so much as quickly.

“Price growth is expected to move back toward a normal range, but this is on top of recent high prices,” says Hale. “So prices will [still] hit new highs.”

While that’s not great news for buyers, homes aren’t expected to cost much more than they did just a few months ago.

“The pace of price growth is going to slow notably, bringing it more in line with buyers’ incomes,” says Hale. “With prices high and mortgage rates beginning to tick up, people won’t be able to be as aggressive in what they’re willing to pay.”

Not many more homes are expected to go up for sale

Housing Predictions
Realtor.com economists predict the number of homes for sale, which is hovering around record lows, will tick up only 0.3%.

Realtor.com / Getty Images

Unfortunately, for frustrated buyers who have had trouble finding the right homes in the right locations at the right price, there isn’t expected to be a rush of homes hitting the market.

Realtor.com economists predict the number of homes for sale, which is hovering around record lows, will tick up only 0.3%. That’s partly due to builders having a tough time ramping up construction as they contend with shortages in workers and materials, compounded by the global supply chain backups. (Single-family housing starts, which is when builders start construction, is expected to rise only 5% next year.)

There are plenty of investors snapping up single-family homes and turning them into rentals. And there is no tidal wave of foreclosures expected to hit now that the government moratoriums are expiring.

There are also more homebuyers today than there are abodes for sale.

Millennials are a massive generation—next year, there will be more than 45 million millennials between the ages of 26 and 35, which are prime homebuying years. So there would need to be substantially more homes built to keep up with the needed housing—except builders stopped building during the Great Recession and there are fewer homes going up today.

“The shortage of homes for sale, that has been more than a decade in the making, will keep home prices high,” says Hale.

Sales will also continue to climb, hitting a 16-year high as they go up by 6.6%, Realtor.com economists anticipate. That’s partly because technology has sped up the homebuying process. Plus, buyers are jumping on whatever comes up for sale in record time before the property is snapped up by another eager buyer.

Attractively priced homes in good shape are expected to continue going under contract quickly.

“Homes are selling so much faster than they have in any previous [years],” says Hale.

That speed supports increased housing turnover as more abodes change hands as folks move into their first homes or relocate, trade up into larger residences, and downsize.

The popularity of the suburbs is also likely to endure. They emerged as the places to be during the pandemic as buyers could score more square footage and bigger yards for less money than in the bigger cities.

“For years, we heard about the dying suburbs because millennials didn’t want to live there, but as they age, guess where they’re heading?” asks Hale.

Some were even moving to the burbs before the pandemic.

“This budding trend was accelerated by the needs of aging millennials, often with families, trying to grapple head-on with the realities of doing more than ever before from home,” says Hale.

Remote work will also likely be a factor. With more workers telecommuting or going into the office only a few times a week, they don’t have to contend with grueling commutes five days a week. Many are more comfortable moving farther outside of the cities where they can get larger abodes with room for a home office at an attractive price.

That’s likely to keep prices high in desirable communities.

“Shoppers were looking for affordable homes with space that could be used flexibly to accommodate working, schooling, exercising, cooking, and all of the other living and relaxing we used to take for granted,” says Hale.

It won’t be easy for first-time homebuyers

First-time buyers are likely to continue struggling to compete with the offers over the asking price and win the bidding wars.

The ace in their pocket is the work-from-home phenomenon that has allowed many white-collar professionals to work from anywhere they have a strong Wi-Fi connection. So they may be able to relocate to cheaper destinations that make up for what they lack in Michelin star restaurants with more affordable home prices.

“Maybe they’re not buying a home in or near a major city where prices are high and the market is still competitive,” says Hale. “But they can move farther away from the city to the suburbs or to an entirely new city where it’s more affordable.”

The savings many who held on to their jobs were able to amass early on in the pandemic—when the stimulus checks went out and many folks cut back on dining out and traveling—may help them with the down payments. Some buyers temporarily moved back home with families or doubled up with friends to save on housing costs as well.

“I know a lot of people are expecting housing prices and sales to peak and then decline. Instead, I think there’s enough momentum from these younger buyers who want to get into the housing market to keep sales moving forward,” says Hale. “They are going to succeed because that drive to buy a home and make it happen when you’re ready is really strong.”

Mortgage rates will continue ticking up

What to expect 2022
Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022.

Realtor.com / Getty Images

Mortgage rates have been the wild card to the housing market during the pandemic. Low rates at the start of COVID-19 helped fuel dizzying price jumps as buyers could afford to spend more on homes. That’s because they were paying less interest each month so they could absorb the higher home prices.

However, as the economy has improved and inflation has risen, making everything from a dozen eggs to a gallon of gas more expensive, rates are also expected to go up. That could help curb the runaway price growth that was seen in the spring. Buyers can stretch their budgets only so far.

Realtor.com anticipates mortgage rates will rise to an average 3.3%, hitting around 3.6% by the end of 2022. That’s up from a low of 2.65% in the first week of January for 30-year fixed-rate loans, according to Freddie Mac data.

While that doesn’t sound like much of a hike, it adds up.

The difference of roughly a percentage point to 3.6% would result in about $157 extra tacked on to the monthly payment of a median-priced home of $380,000. That can total more than $56,500 over the life of a 30-year loan. (This assumes the buyers put down 20% and does not include property taxes, insurance costs, or homeowners association fees.)

It’s also likely to result in homebuying becoming even more expensive. With home prices continuing to tick up a little and rates increasing, those purchasing a home with a mortgage will wind up shelling out more each month.

Rents will keep shooting up higher than home prices

High Rent
Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.

Realtor.com / Getty Images

It isn’t just homebuying that’s gotten more expensive. Rental prices have been soaring, and tenants aren’t expected to get any relief. Prices have surged and are expected to continue rising by 7.1% in 2022.

At the beginning of the pandemic, as home sale prices spiraled, rents in many of the big cities dropped precipitously. Many tenants moved to larger, nicer apartments with more amenities at deeply discounted rents. Then this year, they were hit with steep increases even in smaller, more traditionally affordable cities and suburbs.

The culprit behind the price hikes: There simply aren’t enough homes to go around—for rent or sale. Many aspiring homebuyers who keep losing bidding wars or can’t afford high homes prices are stuck renting. Plus, there are plenty of folks who moved in with family and roommates or split up with their partners during the pandemic who are looking for their own rentals.

“With apartment vacancies still near historic lows and landlords making up for lost rent increases during the pandemic, rents are expected to continue to grow,” says Hale.

The post Will Home Prices and Rents Finally Fall? Our Bold Predictions on What’ll Happen in Real Estate, 2022 appeared first on Real Estate News & Insights | realtor.com®.