What will the housing market look like in 2022? It’s a question on everyone’s minds. After two years of exceptional deviation from the norm, the Hampton Roads real estate market is primed to experience some notable trends in the coming year.
A Summary of the 2021 Housing Market
After a decade of slow growth, the housing market in Virginia Beach and surrounding markets took off on a wild ride starting in February 2020. The housing stats from the past year have continued on this ride.
From January through November of 2021, the median sales price of a home in Hampton Roads increased by 11.34%, while active listings fell by 6.8%. Homes on the market sold fast and had multiple offers, indicating a strong seller’s market. Despite low supply, there were 14.1% more homes sold than the year previously - a result of the historically high demand.
As we look ahead into 2022, the big question remains: will the real estate frenzy continue, or will the housing market finally settle down? Keep reading for CGP’s expert housing market forecast and predictions for the year to come.
2022 Housing Market Forecast and Trends
1. Housing demand will continue to grow in 2022.
While a global pandemic certainly affected some of the intense real estate activity over the past two years, experts had been predicting a competitive market long before.
According to expert analysts at HousingWire, 2020 through 2024 would see the largest number of eligible homebuyers in US history. Young Millennials would start reaching typical home-buying age; older Millennials would be looking to upgrade to accommodate growing families, and Baby Boomers would be retiring and thinking about downsizing.
So, even as pandemic-driven demand begins to ease, other factors will continue to bolster demand. More buyers, continued favorable interest rates, rising rent prices, and a healthy economy are likely to mean even more properties sold in 2022.
2. Home price growth won’t stop - but will hopefully slow down.
Will housing prices go down in 2022? If there is anything worrisome that might crash the housing market in 2022, it would be continued unprecedented price growth. In a healthy market, target annual price growth is 3-6%, not the 8-12% average increases much of the country has seen over the past two years.
There are two ways to slow price growth down: increase the supply or decrease the demand. Although demand will remain strong, other housing market trends are likely to alleviate the lack of supply. Keeping this in mind, we foresee median home sale prices will increase 5-7% in 2022 across Hampton Roads.
3. Rising interest rates will help regulate supply.
For 35 years, interest rates have consistently been falling, and the past two years have pushed them to a point where they can’t feasibly go much lower. This year in Hampton Roads, we saw average 30-year mortgage interest rates as low as 2.70%.
An increase in interest rates projected for 2022 will be necessary for the return of a healthy housing market. This rise should taper demand enough to allow active listings to increase and more options to open up for buyers who are not deterred by the new rates or other home buying myths. Industry experts are anticipating a 30-year mortgage to reach rates as high as 4% by the end of the year - but don’t worry: that’s still a good deal lower than the 2018 average rate of 4.83%.
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4. Active listings will increase slowly.
Because of the global panic and uncertainty surrounding it, the housing market completely skipped the season in 2020, when the most home listings typically hit the market. Demand simultaneously shot up as mortgage rates crashed to provide economic relief. As a result, it will take years for the amount of supply to reach a pre-pandemic normal again.
The small spike in interest rates should help those listings along, however. Buyers’ budgets will be affected, which will ease up demand a bit and provide an opportunity for supply to build.
We eagerly await this trend, as active listings have been at historic lows throughout 2021. In fact, November 2021 saw only 1.03 months’ worth of available housing inventory across the Hampton Roads real estate market - the lowest it’s been since 2009.
In 2022, the tapering of demand and a slow but steady return to seasonality with new listings should help inventory begin to recover. We anticipate a bump up to 2.0-2.5 months’ worth of supply by the end of the year.
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5. Conventional loan limits will change.
In 2021, anyone taking out a home loan over $548,250 was using a “jumbo loan.” These large loans for expensive homes generally have stricter underwriting standards and require private mortgage insurance.
However, the Federal Housing Finance Agency (FHFA) has announced that conventional loan limits will increase by $647,200 - allowing bigger loans to be considered “conforming” without the additional requirements and fees. This could help encourage buyers who are affected by rising interest rates or high sales prices by allowing them to put less money down and save toward future monthly payments.
6. The buying process will start to feel “normal” again.
An estimated one-third of 2021 homebuyers paid more than the asking price, and the turnaround from listing to closing was insanely fast. Bidding wars became the norm as buyers pounced on limited supply.
However, as we predicted, 2021 started to bring back seasonal trends with increased listings over the summer followed by the typical drop as winter approached. As this return to seasonality continues and interest rates go up, we can forecast that supply will slowly recover.
As listings increase in 2022, buyers will have more options and sellers will receive fewer offers. While crafting a competitive offer will still be important, those interested in purchasing a home towards the end of 2022 should have more of an opportunity to shop around and find a home that meets all their budget and has everything they want - like that extra bedroom or home theater they always wanted.
However…
7. 2022 will continue to be a seller’s market (if you play your cards right)
The 2022 housing market in districts throughout Virginia Beach is primed to continue to be a seller’s market. Homes that are priced correctly and in good condition will continue to see multiple offers and bidding wars. That’s why it’s more important than ever to work with an experienced, local real estate professional, like CGP Real Estate, who will help you navigate the ever-changing housing market in 2022 and ensure the best return on your investment.
THE BOTTOM LINE
The housing market trends we forecast for 2022 could mean some long-awaited relief for homebuyers. This will be imperative to the Hampton Roads market as prices continue to inflate. While we see change coming, the process back to pre-pandemic normal will be a slow one.
For sellers to continue to be successful in the new year, they will need to have a strong understanding of the three keys to selling a home. Those who take advantage of expert mentoring will capitalize on the market and maximize their return.
Buyers in Virginia Beach and neighboring cities should be aware of the 2022 housing market trends and have a trusted real estate professional on their side to secure the deal they’ve been waiting for.