Are the prices going to go down? – Councilor Forbes

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The housing market broke new records on several fronts throughout 2021, leaving homebuyers to question whether they should buy now or wait in the hopes that more homes become available and at more affordable prices in the future. 2022.

So far, house price appreciation rose 18.5% year-on-year (YOY) in the third quarter, the highest level in the history of the agency’s house price index Federal Housing Finance (FHFA). Inflation has been increasing at the fastest rate since 1982. At the same time, the number of homes for sale has declined, creating increased pressure on home prices.

The supply of homes plunged to an all-time low, with just 1.38 million homes on the market in June, down 23% annually. Homebuyers have taken in homes faster than ever, reducing the number of days on the market to an all-time high of just 15 days.

And mortgage rates are hovering around the 3.1% mark for a 30-year fixed-rate mortgage – while not the lowest on the books, it’s very close.

Here’s what that means for 2022, according to housing experts.

Will house prices increase in 2022?

Depending on whether you are the buyer or the seller, you might be very happy or very disappointed to hear that house prices are set to increase in 2022, according to most experts. While headwinds like rising mortgage rates and a significant increase in Covid-19 cases may hamper price growth, they will not stop home price appreciation from rising.

“Much of what drove strong price growth this year will follow us next year,” says Nicole Bachaud, economist at Zillow. “We expect to see prices rise to extremely high levels in the first few months of 2022 before starting to decline to more normal levels.”

Most experts say housing demand will remain strong in 2022 unless inflation continues to exceed wages at the current feverish pace, which could dampen buyers’ appetites. Rising inflation is also putting tenants in a difficult position who can no longer afford to save so much for a down payment as rental rates skyrocket.

The national average rental price for a one-bedroom jumped 21.3% and more than 16.7% for a two-bedroom in October on an annual basis, according to the latest apartment guide and report.

“What can affect demand is the affordability challenge,” says Danielle Hale, chief economist at “One thing that can compensate for this is a more competitive job market. “

A recent survey of the Conference board suggests a 3.9% wage cost for businesses in 2022, which would be the biggest wage increase since 2008. But even that increase would not make homeownership easier for most first-time buyers.

The wild card that could chill house prices controls Covid enough to convince people to return to big cities, says Todd Teta, head of products and technology at Attom, a real estate data company. He also says the reverse could be happening – a spike in Covid cases, for example – sparking more interest in suburban real estate.

“If the pandemic wears off, interest in rental housing in congested urban areas could reignite, especially if employers start demanding more workers return to their offices. This could drastically reduce buyer demand and ease the pressure on prices, ”says Teta. But “it will all depend on how many more people with the means to buy are worried about where they live now and how the pandemic is unfolding.”

It’s important to note that while these are national trends, real estate is local. So while places like Boise, Idaho saw a 37.3% year-over-year price increase, Philadelphia saw more modest price growth of 9.9% over the same period.

Home inventory predictions for 2022

One of the main determinants of the evolution of house prices is the quantity of available supply relative to demand. One way to gauge this is to look at the supply of homes for sale in months, which estimates how long the existing inventory for sale would last based on the current sale rate if no new homes were built.

The lowest monthly supply for 2021 was in January, with just 3.6 months of supply and the highest was in August at 6.6 months, a significant jump, according to the Federal Reserve Bank of St. Louis. Although supply has gradually picked up from the spring to the end of 2021, some forecasters expect supply to ease.

On the one hand, the construction of new homes is hampered by the rising cost of building materials and a severe labor shortage. All building materials, from copper to steel, have jumped in costs, but lumber prices, in particular, have seen astronomical price increases. Lumber futures jumped to an all-time high of $ 1,670 per thousand board feet in May. It started to cool down in the summer, dropping to $ 454 per thousand board feet in August. However, it climbed back to over $ 1,044 as of December 20.

Amid the housing affordability crisis, the Biden administration is poised to make lumber costs even higher. The Commerce Department said on Nov. 24 it would almost double tariffs on softwood lumber imported from Canada, from an average of 8.99% to 17.99% on their imports.

Several lawmakers and major trade groups like the National Association of Homebuilders are calling for Canadian tariffs to be reduced, as rising lumber costs may reverse gains made in new home construction over the past six months.

“With Biden doubling tariffs on Canadian lumber, this will add a lot of pressure on house costs and on the time it takes to build a house,” said Robert Dietz, chief economist and vice president Principal of Housing Economics and Policy for the National Association of Home Builders. “That’s why you see the median price of a new home above $ 400,000. “

The median price of a new home was $ 407,700 in October, up 17.5% from a year ago, according to the Federal Reserve in St. Louis. New housing prices have been climbing at an accelerated rate since the start of the Covid-19 pandemic. In April 2020, the median new home price was $ 310,100, the lowest point before jumping almost $ 100,000 more over an 18-month period.

As for existing homes entering the market, that will largely depend on the pandemic, says Selma Hepp, deputy chief economist at CoreLogic, a real estate data analysis company.

“While the baby boomers preferred to downsize before the pandemic, it looks like they’re sticking around for now,” Hepp said. “So far, there has not been a noticeable increase in inventory for sale as the baby boomers have stayed put and have potentially provided shelter for their children and families.”

Should you buy a house now or wait?

Buyers who can afford to buy a home now can consider price factors such as interest rates when deciding to take the plunge. However, first-time buyers face much greater challenges, such as increased down payment requirements.

As home prices rise, so do the monthly down payment and mortgage costs. This means that some buyers might have to save more money or seek cheaper accommodation. As more companies have allowed their employees to work remotely, some buyers have moved to more affordable areas, but not everyone.

James McGrath, a licensed New York real estate broker and co-founder of Yoreevo, a residential brokerage firm, said demand will start to cool in 2022, so there may be more availability for those waiting.

“It’s very difficult for the amount of sales to stay at all-time highs when there isn’t much to sell,” McGrath says. “It seems almost certain that the number of transactions will decrease. With this, buyers can be more patient. There should be less competition from buyers and more homes to choose from as we standardize on the two. “

There are unforeseen variables that can change the price of real estate at any time, so the best strategy is to make sure that you can afford the house you are buying and that you still have room to save for the days of it. rain. For example, if you buy with a partner or co-signer and they lose their job, make sure you can pay off the mortgage with just one income.

You should also plan to live there for at least five years or enough time to cover your closing costs, so that you don’t lose money when you sell. A mortgage affordability calculator is a great tool for determining your budget.

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