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Home Buying

Real Estate Trends 2022: What You Need to Know

With so much happening across the country and costs for everything on the rise, you might be wondering how it’s impacting real estate.

Will we see more skyrocketing home values? How will the real estate market shake out in our current economic climate? Whether you’re selling, buying or staying put, here are the 2022 real estate trends to watch!

Real Estate Trend #1: Home Inventory Is Scarce But Growing

The real estate market has been dealing with low inventory for a while now. That just means there weren’t enough homes for sale to meet buyer demand—a real estate trend that only got worse during the craziness of 2020. But there’s hope: Housing inventory saw its largest jump ever, increasing 30.7% in July 2022!1

Still, the number of active home listings in August 2022 was around 40% lower than August 2017–2019—that’s around 600,000 fewer homes available to buy!2 But don’t worry, we’ll walk you through what to expect if you decide to buy or sell soon.

What Low Inventory Means for Buyers

Low inventory means you need to be on your toes when you go house hunting because the best homes will likely be snatched up fast. In August 2022, most homes spent 42 days on the real estate market—22 days less than typical pre-2020 levels.3

Find expert agents to help you buy your home.

That doesn’t leave much time to hem and haw over your home search. If you want to find a good home in this slim market, here’s some advice:

  • Sacrifice some wants. If you can’t find the house you want, be willing to give up some “nice-to-haves” for your “must-haves.” Find the least expensive home in the best neighborhood you can afford and upgrade over time.
  • Expand your search. Is the location where you plan to buy too competitive? You might be surprised at the gem you can find in a less popular neighborhood. Working with a real estate agent who really knows the area is the best way to find a home that fits your budget and lifestyle.
  • Get preapproved ASAP. Getting preapproved for a mortgage before you go house hunting is a must in any market. And it’s even more important when home supply is low. If you don’t do this legwork ahead of time in a market like this, you could give a preapproved buyer free rein to swipe the home you want right out of your hands.

What Low Inventory Means for Sellers

If you’re selling a home, low inventory means less competition! So if your home is in a great location or has features that buyers want, you can probably expect to see multiple offers coming your way.

On the other hand, higher mortgage rates have knocked some buyers out of the market (more on that later). So if the house you’re selling isn’t the most appealing house on the block, you’ll still get offers—but you’ll likely get fewer offers than a house like yours would’ve received in the last couple of years.

One more thing to keep in mind: If you’re buying a new home after your current home is sold, you probably won’t be in the driver’s seat anymore. Decide on plans for your next home before you sell.

Real Estate Trend #2: Annual Home Values Are Still Rising

Yes, home prices are still going up year over year. The national median home price for active listings increased by 14.3% to $435,000 in August 2022 compared to August 2021.4 But that rate actually trails behind the average 16% annual growth rate seen in June and July—which may be a sign that the speed of home price growth is calming down.5,6

And since there’s still strong buyer demand and a shortage of homes for sale, prices aren’t going to plummet. They’re dipping a bit from month to month (which is a usual seasonal trend for prices after peaking in early summer)—but they’ll still be higher than they were at the start of this year.

So, if you’re a seller, that should put a smile on your face. And hang tight, buyers—we have some advice for you too.

What Higher Prices Mean for Buyers

If you’re going to buy a home in this expensive market, you absolutely have to know how much house you can really afford. Commit to staying within that budget no matter what—don’t cave to the pressure to buy because you’re tired of watching competitors pluck good homes off the market.

We know waiting on the right home in your budget can get frustrating. But you’ll be glad you did it when your home is a blessing instead of a big, honking headache of a mortgage payment you can’t afford!

To feel confident about buying a home this year, follow these tips:

  • Limit your house payment to no more than 25% of your monthly take-home pay. This payment includes principal, interest, property tax, home insurance, homeowners association (HOA) fees and, if your down payment is lower than 20%, private mortgage insurance (PMI)—an extra fee added to your mortgage to protect your lender (not you) in case you don’t make payments.
  • Save a big down payment. Ideally, you’ll want to save a down payment of at least 20% to avoid PMI. For first-time home buyers, a smaller down payment like 5–10% is okay too—but then you’ll have to pay PMI. Saving a big down payment like this is possible! You just have to stay patient and focused. Who knows? You might even be able to save for a five-figure down payment by this time next year!
  • Choose a 15-year fixed-rate conventional mortgage. The lowest total cost home loan (and the only one we ever recommend) is a 15-year fixed-rate mortgage. Expensive rip-offs like the 30-year mortgage, FHA, VA, USDA and adjustable-rate mortgages will charge you tens of thousands of dollars extra in interest and fees and keep you in debt for decades. Stay away from those!

Now crunch the numbers with our free mortgage calculator to figure out a monthly payment your budget can handle. And then work with an expert real estate agent to find houses for sale within that budget.

For more help buying a home in this crazy market, check out our free Home Buyers Guide. It has all the answers you need to buy a home with confidence.

What Higher Prices Mean for Sellers

A nice profit may be on the horizon! And that’s great news because you’ll really want that extra money when buying your next home. To get the best offer for your home, work with an experienced agent who really knows your local, current real estate market.

And be sure to wait for the right offer. Some buyers may try to gut punch you with a low number. If you aren’t in a hurry to move, wait for an offer that gives you the most profit. Remember, the less desperate person always has the upper hand when negotiating.

Real Estate Trend #3: Mortgage Interest Rates Are Higher

The average mortgage rate (the interest fee lenders charge as a percentage of your loan amount) was lower than it’s ever been in 2021. But it’s gone up since then.

In 2022, the average rate for a 15-year fixed-rate mortgage jumped from 2.66% in January to 4.56% in August—the highest it’s been in over a decade!7 Meanwhile, the average rate for a 30-year fixed-rate mortgage reached 5.22% in August.8

By the way, that’s a big reason we only recommend 15-year mortgages: They tend to have lower rates than 30-year mortgages, and since they end 15 years sooner, you’ll pay less interest over time. That’s a one-two punch when it comes to saving money!

If you want to refinance or get a mortgage from a lender who is RamseyTrusted and actually cares about helping you pay off your home fast, talk to our friends at Churchill Mortgage.

What Higher Rates Mean for Buyers

Higher interest rates can put a dent in affordability. So don’t feel pressure to buy a house you aren’t ready for. But don’t let it scare you either: A high interest rate on a house you can afford is still doable.

Remember to stick to our advice on monthly payment limit, down payment amount and mortgage type (see Real Estate Trend #2), and you’ll be in great shape!

What Higher Rates Mean for Sellers

Higher interest rates mean fewer buyers will be motivated to buy your home. So while houses were selling like hotcakes a year or so ago, your house might be on the market a little longer now. Prepare to be patient while waiting for offers.

Real Estate Trend #4: Online Real Estate Services Are Growing

No doubt you’ve heard of real estate services like Zillow that let you browse or list homes for sale online. But did you know online services now offer to buy and sell your house for you?

Third-Party Buyers

Here’s how the new iBuying trend works: You tell companies like Opendoor about the house you want to sell. They buy it from you, pump some money into it to resell at a higher price, and handle all the home processing stuff like inspections, repairs and home showings.

These companies promise you less hassle and charge you pretty much the same as an agent commission for selling costs—but it’s not all rainbows and sunshine. Some of these companies include an additional service fee (icing on their cake), which may mean less profit for you.

Worst of all, you don’t get the benefit of working with a top-notch agent who actually knows the current real estate market in your area and could sell your home for more money.

Using a “Virtual” Agent

Hybrid services like Redfin aim to reduce traditional agent commissions by handling things online. This gives you partial services that are similar to working with an agent but for a fraction of the cost. Think of it as a middle ground between selling with an agent and selling by yourself. But when selling a home, be wary of the middle ground. Your home is your biggest asset, and you get what you pay for!

Mobile or Online Closings

In related news, digital technology also makes it easier to handle buying and selling documents virtually. For example, many home transactions now use electronic signature apps and remote online notarization to streamline the process.9 In other words, you could buy or sell a house this year without getting out of your car or ever changing out of your bathrobe and slippers.

You can expect to see more of these trendy digital services in real estate in 2022 and beyond. Just remember not to get swept up in every hot new trend: Use your brain, your budget and a great professional real estate agent to make sure you’re getting the best deal on the right house for you.

Real Estate Trend #5: Risky Buying Options Are More Accessible

Okay, let’s cover some other trending, “creative” ways to purchase a home (beware!).

Rent-to-Own

If you’re itching to buy a home but can’t quite afford it yet, some sellers like Divvy offer a rent-to-own agreement. In this (bad) deal, you agree to rent the home for a while—anywhere from several months to several years—before becoming the owner.

The “plus” side of rent-to-own is that you can get into a house fast, without waiting to save a down payment. (But you know how we feel about that.) Also, you don’t have to qualify for a mortgage right away.

The downside of rent-to-own is that it makes your rent more expensive because some of your monthly payment will go toward future homeownership. With rent prices increasing across the country, now’s not the time to pay even more!

And if you later decide you don’t want to buy the house or something happens to break your contract (like you don’t get approved for the mortgage), you won’t get all those extra payments back. They will have been a waste! Plus, you may have to handle repairs and maintenance yourself, even while renting. Sounds like there’s not much in this for you, right? We think so too.

Bottom line: If you can’t afford a home yet, don’t buy one. Keep saving for that down payment and wait until your financial ducks are in a row. It’ll happen sooner than you think if you’re willing to work at it!

Down Payment Loans

Another risky real estate trend to avoid is taking out a personal loan to fund a down payment. That’s the same as buying a home with 0% down. You borrow the entire cost of the house—except this way you borrow it from two different companies at two different interest rates (which means twice as many headaches).

Purchasing a home with no money down is never a good idea. Remember, you want a down payment that covers at least 5–20% of the home’s value. Buying a house with anything less will keep you from reaching other financial goals because you’ll have to pay too much extra in interest and fees. Thankfully, not many mortgage lenders allow you to do this—plus, it can even disqualify you from getting the mortgage you need.

What if I’m Not Buying or Selling a Home This Year?

You may be thinking, All this is great, but I’m not going anywhere anytime soon. We hear you, and here are the real estate trends you should watch for now:

1. Equity will probably increase slightly compared to last year.

Experts have different opinions on how the market will turn out. But Freddie Mac believes home prices will continue to rise in 2022 by 12.8% and in 2023 by 4%.10 The National Association of REALTORS® (NAR) thinks price growth will be 9.6% in 2022 and 1.2% in 2023.11

If that’s true, it’s good news for you because you’ll likely make a nice profit if you do decide to sell. And if you decide to stay put? More equity means a higher net worth! Continue to monitor how much your home is worth to make sure your equity (what your home is worth minus how much you owe on it) is going up.

2. A real estate market crash looks unlikely.

With all the uncertainty behind everything that happened in 2020 and with home prices growing a little slower in 2022, you might be wondering if the housing market could collapse. Well, it’s impossible to know for sure, but real estate experts suggest a housing crash is unlikely.

After all, buyer demand is high. But there’s still a very low supply of home listings. This keeps home buying competitive and allows home prices to hold steady.

3. Regardless of your neighborhood, buyers are interested.

Since home prices have experienced rapid growth over the past few years, some buyers may be less choosy. In fact, determined ones might be willing to consider neighborhoods that don’t have easy access to highways or aren’t close to a big city. If you think you live in an unpopular neighborhood or believe your home isn’t what buyers are looking for, think again. Now may be your perfect time to consider selling your house.

Take Control of the Real Estate Trends With an Experienced Agent

Whether you’re selling or buying, you can take advantage of the current real estate market trends by partnering with an experienced agent.

To find agents who earned the right to be called RamseyTrusted, try our Endorsed Local Providers (ELP) program. Our team will match you with top-performing agents we recommend in your area.

Find your RamseyTrusted real estate agent today!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners. Learn More.

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