We're all experiencing the effects of the ongoing supply chain problems and record-high inflation have a massive impact on almost every industry - including real estate. Whether you're selling or looking to buy in 2022, it's beneficial to understand the many factors that play in the housing market right now.
Inflation has impacted every aspect of our lives and the real estate market is no different. From home prices to mortgage rates, here are five things to know about housing and home buying in 2022.
1. Mortgage rates are higher - and may continue to increase
As of March 2022, the interest rate is 4.59%, up from 2.65% in March 2021. To combat worsening inflation, the Federal Reserve - the central bank that dictates interest rates - is planning to raise its benchmark short-term interest rates by 0.5% in 2022. Current interest rates are climbing as a result.
For homebuyers, higher interest rates means less buying power. The higher the rate, the less money you can borrow; ultimately, you have to look at lower priced homes. Compared to the historically low rates of 2020 and 2021, these 2022 rates may look intimidating, but they're actually pretty fair if you look at rates over the last 20 years.
2. Home prices are near record levels
Home prices continue to be high but may plateau or lessen as the Federal Reserve increases interest rates. The cost of homes was up 18.8% in 2021, making it the highest in 34 years according to the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index.
However, experts are expecting a slow down soon. According to a 2021 report from the National Association of Realtors (NAR), median home prices are expected to increase to 5.7%, with inflation rising by 4%. For all the first time homebuyers, it is intimidating to make an offer but you might find more affordable home options - or experience fewer bidding wars - as the year goes on.
3. Supplier chain issues are stalling home renovations
Manufacturing delays, shipping delays, and high shipping costs have drawn out or stalled most home renovations and repairs. If you plan to sell or rent your home this year, you might spend more time and money on upgrades & repairs while preparing to list your place.
If you're thinking about buying, consider your needs. If you don't have the budget or time to fix up a house, you might need to reassess your must-haves or start considering turnkey properties.
4. Home inventory is still low
Homes on the market are still low. In Austin they are staying on the market a bit longer but still the inventory remains low. The factors at play are supplier shortages significantly slowing down new construction limiting the number of affordable condos, townhomes and apartments. At the same time, demand for housing has increased with more people working from home, millennials entering the housing market, and city dwellers looking into suburban areas.
5. It's a seller's market
Low home inventory and higher prices means it's a seller's market. If you're currently looking to sell, you're in a great spot. Your home has probably increased in value which means the value of your home down payment increased, too. If you have a fixed-rate mortgage, inflation means you're paying less for the loan now than when you first got it.
What does this all mean for your homeowners' insurance policy?
Home insurance rates are increasing as well. The average cost of homeowner's insurance in 2021 increased to $1,398, according to the Insurance Information Institute. Part of the reason is many areas are in risk of natural disasters due to climate change. To keep your costs lower though you can choose a plan with a higher deductible and/or speak with one of our agents to find discounts by bundling insurance policies. Most importantly, you need to find a home insurance provider and plan that gives you the best protection for your money.