The unpredictability of the U.S. housing market over the past two years has kept homebuyers on their toes. While the circumstances that led to this market have been thoroughly discussed and studied, the question foremost in homebuyers’ minds is what to expect from the 2022 real estate industry. A Greenwood Village realtor can provide specific, local information, but knowledge of the national present and past trends is necessary to understand the framework of that information.
2021 homebuyer trends and their causes
When considering future trends, it is essential to look at the previous year’s trends and their causes to ascertain whether they will continue into the following year. For example, trends in 2021 resulted from mortgage rate fluctuations, the increased popularity of remote/hybrid work environments, and a low housing supply. Exploring the details of these circumstances helps predict the real estate trends and market of 2022.
The mortgage rate fluctuations in response to COVID-19 and its variants
Mortgage rates hit record lows at the height of the pandemic due to the actions of the Federal Reserve to stimulate the economy and prevent an economic depression. Rates remained low throughout 2021 but fluctuated wildly in response to the COVID-19 variants. Mortgage rates hit an all-time low of 2.65% on January 7, 2021, with the highest rate in 2021 on April 1, 2021, of only 3.18%. Even the highest rate of 2021 was still very low compared to pre-pandemic rates, which were well above 3.5%.
Rate fluctuations coincided with levels of consumer confidence in response to the different variants of COVID and vaccine development. This was evidenced by the record low in January 2021 attributed to the fear of the circulating beta variant, which was more likely to develop into a severe case than the alpha variant. Mortgage interest rates began to climb steadily due to intensified vaccine development. The record high of 2021 was reached before COVID-19 infections rose, and further vaccine research was paused before it dived below 3%. A subsequent drop occurred in July 2021 with the prevalence of the delta variant, which was significantly more transmittable and caused more infections than the earlier versions. Disregarding the isolated drops, mortgage rates on average maintained an upward trajectory throughout 2021. Greenwood Village and the state of Colorado’s mortgage rates on average trend on the same level as the national rates and maintain the same upward trend.
Rate fluctuations coincided with levels of consumer confidence in response to the different variants of COVID and vaccine development. This was evidenced by the record low in January 2021 attributed to the fear of the circulating beta variant, which was more likely to develop into a severe case than the alpha variant. Mortgage interest rates began to climb steadily due to intensified vaccine development. The record high of 2021 was reached before COVID-19 infections rose, and further vaccine research was paused before it dived below 3%. A subsequent drop occurred in July 2021 with the prevalence of the delta variant, which was significantly more transmittable and caused more infections than the earlier versions. Disregarding the isolated drops, mortgage rates on average maintained an upward trajectory throughout 2021. Greenwood Village and the state of Colorado’s mortgage rates on average trend on the same level as the national rates and maintain the same upward trend.
Changes in the way employees work and consumers buy
Flexible work options changed many consumers’ priority of close proximity to the workplace when considering a new home purchase. Zillow dubbed this trend The Great Reshuffling. Affordability and a larger home have taken a higher priority than a close commute, but this trend was not due solely to the pandemic. Consumers had already started to move farther away as early as 2018 or 2019, but the pandemic accelerated these moves. Remote work increased Americans’ amount of time at home and increased the likelihood of a remote worker saying they would consider moving. American workers are also more likely to leave their jobs in favor of something more flexible than before.
Supply chain breakdowns and housing inventory
Record lows in the real estate market were not reserved for the mortgage rates in 2021. Housing inventory also reached an all-time low in November. The seasonal trend of housing availability declines in the winter, which paved the way for a new 2021 low. Greenwood Village housing inventory in 2021 was also low compared to the average.
Although the housing inventory level is considerably lower due to the supply chain breakdowns and labor shortages caused by COVID-19, the pandemic only intensified supply chain constraints that have plagued the housing market for decades. According to the White House, population growth had been outpacing the housing supply for 40 years, with new home underproduction since the mid-2000s consistently the cause even with the increase of new home construction in 2021. Low housing inventory and high demand resulted in increased consumer competition, a rapid rise in median sale prices, a decrease in average days on the market, and an increase in the average sale-to-list price.
Although the housing inventory level is considerably lower due to the supply chain breakdowns and labor shortages caused by COVID-19, the pandemic only intensified supply chain constraints that have plagued the housing market for decades. According to the White House, population growth had been outpacing the housing supply for 40 years, with new home underproduction since the mid-2000s consistently the cause even with the increase of new home construction in 2021. Low housing inventory and high demand resulted in increased consumer competition, a rapid rise in median sale prices, a decrease in average days on the market, and an increase in the average sale-to-list price.
2022 trends
With the context surrounding 2021 real estate trends in mind, 2022’s housing market can now be predicted with more accuracy.
Mortgage rates
Mortgage rates steadily rose through 2021 and can reliably be predicted to continue to do so. In addition, the Federal Reserve projects multiple interest rate increases by the end of 2022, and the mortgage stimulus program is expected to end by the spring of 2022. Given these projected rate increases, now is the opportune time for the average homebuyer to reach out to a Greenwood Village realtor and take advantage of these record-low mortgage rates before they rise to pre-pandemic levels.
The Great Resignation and The Great Retention
Flexible work environments will continue to impact home-buying decisions and determine which areas will be most in demand as the pandemic comes to an end. In addition, companies are attempting to shift away from Great Resignation to Great Retention, as only 65% of employees report they plan to stay with their employer in 2022. Therefore, employers need to become more receptive to their employees’ needs, especially regarding hybrid and remote work.
Construction and competition
The construction of new homes will likely decrease the demand-supply ratio in 2022, but inventory will still fall short of demand. The housing shortage will still define the 2022 real estate market, leading to the same characteristics, though on a lesser scale, of the 2021 market.
Home sale prices in Greenwood Village are some of the highest in the nation and can be expected to increase in 2022. With an uptick in demand for all property types in Greenwood Village, it can be concluded that scarcity will be a crucial feature of the market in 2022. The number of days on the market, both in the United States and in Greenwood Village, is expected to increase, and fewer homes are selling above the list price. So while the markets will continue to favor the seller, they will not have the same strength as they did in 2021.
Although trends are neither set in stone nor are they a guarantee, the pandemic has made one thing clear: It is not entirely possible to predict how the real estate market will react in the future. Contact your Greenwood Village realtor Anne Dresser Kocur to explore what current mortgage rates and markets are best suited for your home needs.
Home sale prices in Greenwood Village are some of the highest in the nation and can be expected to increase in 2022. With an uptick in demand for all property types in Greenwood Village, it can be concluded that scarcity will be a crucial feature of the market in 2022. The number of days on the market, both in the United States and in Greenwood Village, is expected to increase, and fewer homes are selling above the list price. So while the markets will continue to favor the seller, they will not have the same strength as they did in 2021.
Although trends are neither set in stone nor are they a guarantee, the pandemic has made one thing clear: It is not entirely possible to predict how the real estate market will react in the future. Contact your Greenwood Village realtor Anne Dresser Kocur to explore what current mortgage rates and markets are best suited for your home needs.