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The Dirt On 2022: 3 Housing Market Predictions for the New Year

Posted by John Hathorn on January 14, 2022
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No one can predict exactly what the housing market might be this year. However, as the local market expert with years of analytical data and anecdotal experience, I will make a few predictions.

1. The outlook for buyers may improve, but it will remain a seller’s market for the foreseeable future.

“Over the past year, we have seen one of the most robust seller’s markets in a generation,” Remarks Frank Martell, president and CEO of CoreLogic.

2021 was a record-breaking year for U.S. home price growth. Nationally, prices increased 18 percent from July 2020 to July 2021, the highest increase in 45 years! Here in California, prices increased 19.4 percent for the bottom third of the market in the Los Angeles-Long Beach-Glendale CA Metropolitan Division — those priced under $720,000, often designated as starter homes. The top third of the market (homes over $1,084,000) saw a 17 percent increase.

With rising prices comes more obvious pressure on buyers. Inventory will also remain tight and 2022 will continue to be a seller’s market. However, Realtor.com analysts predict the housing inventory will rebound from 2021 lows, with inventory increasing 0.3 percent on average in 2022.

2. Interest rates will rise due to government intervention.

Due to the Federal Reserve’s efforts to combat foreclosures, the rate on a typical 30-year fixed-rate mortgage loan fell below 3 percent at the start of the pandemic and has been hovering near that ever since. This has helped to keep monthly payments low in the face of record-high home prices.

In December the Federal Reserve announced that they plan to pull back to some degree on their very accommodating monetary policy. According to the Federal Reserve spokesperson and chairman Jerome Powell, “…elevated inflation pressures and a rapidly strengthening labor market, the economy no longer needs increasing amounts of policy support.

That means the Fed will be scaling back their purchases of mortgage-backed securities and long-term treasury notes and bonds in the marketplace back to a position of zero-net purchases by the end of March.

Both Redfin and Realtor.com predict a 30-year-fixed mortgage rate will reach 3.60% by the end of 2022, compared to an average of 3.30% now. This will slightly reduce the buying power for some Buyers.

3. House Prices are on the rise.

Historically low mortgage rates of 2021 helped offset the higher listing prices. This contributed to drive demand to buy homes. Yet with the shortage of inventory on the marketplace going into 2022, experts predict home prices will continue to rise.

This means would-be buyers can expect more of the same bidding wars on many homes, especially in the spring and summer when sales traditionally increase. In fact, some experts predict home values will rise by 11% in 2022 — not as much growth as in 2021, but still substantial.

By winter, higher mortgage rates along with already high home prices will likely slow annual price growth down to around 3%, which represents a steep drop from the record 24% increase posted in May 2021. If annual price appreciation falls to 3%, it would only be the second time it will have fallen so low since the end of the housing crash in March 2012. This low-price growth will likely discourage speculators from entering the market and allow more first-time buyers to have a chance at winning a home.

Will these predictions come true? Only time will tell. What are your 2022 market predictions? Do you think my predictions are off? Let’s discuss…

DID YOU KNOW

US Home ownership costs rose in the 4th quarter of 2021, with the typical home consuming 25.2% of the average national wage of $65,546. In comparison, the fourth quarter of 2020 saw ownership costs at 21.5%. (ATTOM)

U.S. inflation is on track to have closed out 2021 near its highest level since 1982 as robust consumer demand exacerbated pandemic-related supply shortages. Estimates by the Labor Department’s consumer-price index—which measures what consumers pay for goods and services—rose 7.1% in December from the same month in 2020, up from 6.8% in November. (CNBC)

Inflation in the world’s rich economies has hit a 25-year high, fueling concerns about the rising cost of living for households and increasing pressure on central banks to raise interest rates. Many expect four interest rate hikes this year to curb this spike. (Business Insider)

90402 REAL ESTATE NEWS

As we welcome 2022, there are currently 10 active listings.

Three of these came to market this year.

419 22nd Street– Fully priced at $7,950,000. Brand new 2022 Traditional home. Everything we’ve come expect in a new home, including a pool. Lot was purchased in 2018 for $3,050,000.

740 25th Street– Listed for $5,750,000. Traditional 4,000 sqft home. This will be an interesting sale. The style is no for everyone but the attached garage in front and the scale make it appealing.  Built in the 80s and ready for some updates.  Beautiful pool as well! Last sold in 2008 for $3,140,000.

721 25th Street– Listed for $2,975,000. Charming Traditional lot-value with guest house. Offers are due next week and it is expected to sell quickly in a bidding war.

Seven properties are under contract, with one going into escrow this year.

2202 La Mesa Drive – Listed for $7,000,000.

Four sold so far this year!

544 11th Street – I represented both the Buyer and Seller with a sales price of $4,302,000.

237 Alta Ave – I also sold this lot value for $5,300,000.

523 9th Street – Sold for $5,940,000. Originally listed for $5,950,000.

425 Marguerita Ave – Sold for $10,000,000. Originally listed for $12,999,000.

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