It’s a tough time to be a home buyer right now, and relief may still be a long way off.
During the pandemic, home prices soared and inventory dropped steeply. Things haven’t improved as much as we hoped they would. In 2022, there are a bit more options for home buyers, but prices haven’t come down much. As the Fed increases interest rates this year, that means mortgage rates are going up, too.
Here’s a deeper look at the current home buying climate, and what you can expect if you’re in the market for a new place:
2022 Housing: Sky-high prices
Whether you’re buying, building or renting, there’s no way around it: housing is expensive right now.
There are four main reasons that this is happening:
- Inflation, which is causing price increases in everything from gas and milk to lumber and furniture.
- Record low home inventory. There are very few houses available to buy right now, which means any available houses can sell for much higher than they normally would, thanks to less competition.
- Supply chain issues. One way to handle low housing inventory is to build more housing, but we are still dealing with supply chain problems from the pandemic. That means the cost of building materials is still very expensive, which leads to wildly expensive price tags for new homes.
- Interest rates. In an effort to curb inflation, the Fed has increased interest rates. We are now seeing 5 percent mortgage rates for the first time in over a decade.
Any one of these problems can cause the housing market to struggle, but when you combine them, it makes for a very serious problem that won’t go away easily.
What’s to come for the housing market?
If some of these factors feel a bit reminiscent of the 2008 housing market crash, don’t worry – the situations are actually quite different. That doesn’t mean we couldn’t experience a crash of some kind, it just means the setups are not the same.
First, there were stricter regulations put in place to avoid a repeat of the 2008 housing bubble. And second, housing inventory is still so low that it’s extremely unlikely home values would suddenly tank.
It’s going to take quite a while to improve inventory, with some experts saying levels won’t be back to normal until 2024 or 2025.
2022 Housing in New Hampshire and Massachusetts
New Hampshire and Massachusetts were in a bit of a housing crisis even before the pandemic. Demand for housing far outweighed supply, especially as young professionals moved to the area. Of course, the past couple of years have only exacerbated that issue.
According to the Massachusetts Association of Realtors, single-family homes for sale were down 50 percent in January. And in February, the NH Business Review hosted a webinar titled “What NH Business Can Do to Help Solve the Housing Crisis.” They cited the housing shortage as a major deterrent for new workers to come to the state.
There are several ideas on the table in both states to try to ease the housing crunch, but the national struggles are compounding the issue.
What happens now?
2022 is a challenging year to be in the market for a new home. Home inventory is way down, and you’ll probably pay top dollar for the properties that are available.
But if you do have to buy, make sure you’ve done your homework ahead of time. Buying a house right now doesn’t leave you much room to think, so go into the house hunt well-prepared. Know your must-haves, your budget, and how much wiggle room you have to negotiate. That way, if you do have to act quickly on a house you like, you won’t get stuck in a decision that might not be in your best interest.
And if you don’t have to move right now, it might be worth hanging out in your current place for another year or two. Hopefully by then, more inventory will open up, giving you more options – and better prices.
Do you need help planning for your financial future? Contact me today to set up a meeting to talk about your goals.