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It’s coming up on the new year and to a lot of people, this means making plans for the future. Maybe you are thinking that it is finally time to sell your house and get a new start.

So what can you expect as far as the housing market in 2022?

Everyone can agree that the market for 2020 and 2021 has been crazy. By some estimates, the national average value increase for houses has reached 20% for the last couple of years.  Is this something that will go on?

Probably not.  According to the latest forecast put out by Fannie Mae, median home prices are expected to rise 7.9% between the fourth quarter of 2021 and the fourth quarter of 2022. And you might think that 8% is a huge drop from the 20% we have seen, it’s still nearly DOUBLE the historical average of around 4% annually.

Zillow is predicting an even larger home value increase of around 11%, but some other forecasters are going as low as 2%.  So, think somewhere between 2% AND 12%  increase for the national average.

It’s still an increase in value, arguably at a healthier rate

As for mortgage rates, Fannie Mae is predicting a slight increase, from the current 3.1% to 3.4%. However, these are still historically low rates so it’s not expected that this small increase will do much to drive down housing prices.

So what is fuelling these growth rates, year after year?  It’s a lot of factors working together. Here is a list of some of the major contributors.

  1. Lower Interest Rates

Interest rates have been on a steady decline since the 1980s. Interest rates reached their highest point in modern history in 1981 when the annual average was 16.63%. They have dropped steadily over time until they have reached the 2-3.5% rates today.  It makes home buying VERY attractive and affordable.

  1. Higher Building Costs

Building materials increase in price all the time. Since the supply interruptions associated with Covid and the current economy, the prices for lumber and other materials have grown exponentially.  It only makes sense that it is having an effect on new construction making, new houses pricey, and increasing the demand/value of houses already on the market.

  1. Lower Builder Trust

The higher prices for new construction are driving many builders out of business. Or, at the very least, it is making them more cautious as to how many homes they are willing to build at any given time.  So there are fewer newly built homes for sale on the market. This will also drive up the value of houses still on the market.

  1. Demographic Change

Over the past decade, there have been more and more people reaching the age where they can afford to buy homes of their own.  This higher population of home buyers coupled with fewer new construction homes is a huge influence on housing prices.

Many people are also experiencing the new phenomenon of working from home.  They need to upgrade to larger houses that might include office space.  It’s a huge shift from the small apartment or condo dweller that worked from an outside office.

  1. Other Factors

You can also figure in higher prices for land, government housing assistance, and investment companies.  All of these are part of the real estate picture that makes the housing market attractive despite the rising prices. 

It is important to note that these value increases reflect a national average in real estate prices.  Property values could change at different rates in various local markets.  For example, here in Memphis, Tennessee predictions are for close to a 6% increase.  Its also possible that in your area the prices could actually decrease. You should be aware of the market data in your area whether you are a home seller or a home buyer

If you are planning on selling your home but were reluctant to because it was increasing in value at such an amazing rate, we will, most likely not be seeing that sort of thing in the coming year. While we will see a steady and relatively high increase if you feel the need to sell you might want to consider pulling the trigger on that.  If, however, you are not in a hurry, you can still see some growth in your property value for quite some time.

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