As 2021 comes to an end, everyone is still feeling the pandemic’s influence on the world. In the real estate market, it was challenging year to buy a home.
The key factors in this year’s market were low inventory, low interest rates, high demand and fierce competition. If you were lucky enough to win a competitive offer, you most likely had to waive all your contingencies (including financing) and escalate in price not by $5,000 or $10,000’s of dollars, but by $100,000’s of dollars. This has caused many experts to worry about housing affordability and inflation. For many homebuyers the real estate market has escalated out of reach.
We saw home prices soar up 16.5% in 2021 nationwide, and in many areas price escalations were much higher. In Seattle the Case-Shiller index showed a 3-5% increase month-to-month and a 23% annual increase in prices.
Is a bubble coming? Experts say no. In general, economists expect to see a slow down in prices and economic growth across the board in 2022.
What will 2022 bring? Unfortunately we don’t see much change for the spring, as low inventory and high demand continue. According to Matthew Gardner, chief economist at Windermere, there will be interest rate increases in 2022 to combat rising inflation with at least three to four stair stepping price increases happening throughout the year which may provide some relief on price increases as they rise towards 4%.
As people get back to work and wages rise in many industries like hospitality and medical professions, the labor shortage is still a concern. The labor force is still down by 3 million from its pre-pandemic peak. There are still millions of people who are not looking for work.
For those buyers who are waiting on the sidelines wondering when things will balance out, we may not see a normalization in the market until 2023. Demand will remain high in 2022 and sales will continue to be strong. If you are a seller 2022 should be a great year to list your home.