The housing market in 2022: what buyers and sellers need to know
The current housing market presents a range of challenges, opportunities, and uncertainty. Changing interest rates, the shift in the definition of home, and a competitive environment are just a couple of the factors making the housing market in 2022 unique. What do individuals looking to buy, sell, or build a home need to know about the current market?
In our thirteenth Sharing Knowledge Series episode, host Kevin Vonderau, chief lending officer at Westfield Bank, is joined by guests Andy Camp, president, Cutler Real Estate and Bob Giacomo, senior vice president, mortgage market leader at Westfield Bank to discuss how to navigate the market, planning and preparedness and their insights on buying, selling, and building a home.
Below are some of the key takeaways from the conversation with Kevin, Andy, and Bob. Watch or listen to the full episode here to learn more.
Have the right professionals in your corner
Andy’s advice to anyone looking to buy, sell, or build is to work closely with a highly qualified agent who will design the right strategy tailored to your individual needs. “This is the biggest purchase you are going to make in your life, most likely,” Bob stresses the importance of working with a banking professional when dealing with a purchase of this magnitude. Having a credible, accessible banking professional in your corner is one of the most important things you can do as you navigate the housing market. With the rise in digital lending, nothing can replace working face-to-face with a lender who will be an available partner throughout the process’s pressures and challenges.
Bob adds that the next important step is to make sure you have a good mortgage plan in place. Experienced mortgage loan professionals can help ensure that you’re confident, you can afford your loan, prepared to make an offer on a property, and feel in control of your financial future.
Impacts of COVID-19 on the housing market
The pandemic has significantly impacted the market. The initial shutdowns prompted many people to shift how they live and work; employees began working from home, with some employers opting to offer hybrid or permanently remote options. Individuals and families started to reevaluate the space in their future homes, looking to add one or multiple at-home offices, gyms, additional bedrooms for remote education, and more outdoor living space. Meeting this lifestyle shift is a lasting impact of the COVID-19 pandemic, Andy says.
Boomerang buyers and perceived housing shortage in a seller’s market
The buyer demand is currently exceeding the housing supply, while new construction lags. Homeowners are reluctant to put their homes on the market fearing they will not be able to find a new home.
“It’s not so much a housing shortage,” Andy says, “It’s a shortage of available housing in what is considered a “traditional” real estate market.” The National Association of Realtors® considers a “normal” market to be five to seven months of inventory, however last year Cutler Real Estate experienced less than forty days of inventory.
A noticeable trend in Ohio is “boomerang buying.” Where those connected to the state (born and raised, attended college, etc.) weigh the cost of living compared to where they are currently residing and determine that they can get more value for their money when purchasing a home in Ohio.
States like Ohio, Michigan, and Indiana are well-positioned to attract boomerang buyers. There has been speculation that an expected rise in interest rates will slow the housing boom, but Andy is confident that that won’t be the case, especially in Midwest cities. The increased rates will slow the boom in over-heated markets like Austin, TX and Denver, CO, for example, as these markets will become unaffordable for buyers.
Andy describes, now, being a sellers’ market, which he expects to last for the next five to seven years. But as more sellers enter the market and buyers feel less pressure to jump on an offer, that will start to change. Andy’s advice to homeowners considering selling their home is to do it within the first six months of 2022 to maximize their home’s value.
New home construction
For those interested in building, new home construction is a great option, but be sure to weigh the pros and cons. Having a reputable builder, realtor, and trusted banker to work with you is essential; together, they will help you create a timeline and budget to meet your needs, which is especially critical amid the current construction supply volatility.
“You’ve never had a house built that’s cost this much, and you’ve never had it built with labor that was paid this much,” Bob explains that a big challenge in providing affordable housing comes down to these two main factors: an increase in wages and building material costs. The labor needed to build a home is the most expensive it’s ever been, and the cost of housing supply (lumber, windows, gutters, pipes, appliances, etc.) is up an average of 22 percent year over year.
Land is another factor in the state of the housing market, Andy says. Current zoning laws are obstacles for allowing new construction to meet housing demand. To expand access to new construction opportunities, Andy believes that “in the future, a lot of communities are going to take a good hard look at breaking down the stigma of manufactured housing and how that can be incorporated into responsible planning.”
Are we approaching a bubble?
Andy and Bob agree that we aren’t close to a bubble citing underwriting guidelines, a continued conservative lending environment, and federal regulations.
Federal financial regulations, specifically the Dodd-Frank Act, have impacted how banks work with home buyers. Bob credits this as a reason why we’re not currently in a bubble. “We’re making sure we’re putting you in a good position,” he says.