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2022 will prove to be the most challenging year for buyers Not because of what they can afford but rather what they can't find. Covid-19 slowed home transactions down a bit. With fewer options in 2022, a lot of buyers may delay a home purchase at a time when they could afford a home simply because it's harder to find "the one". The good news is there are new ways to buy, sell, or trade-in a home that make navigating these conditions a lot easier.

The 2022 housing market

Is 2022 a good time to buy or sell a home? Here's what to expect 2022 in a nutshell:

In 2022, interest rates are starting to slowly increase, this will automatically slow the rise of home prices to become affordable opportunities for buyers who are migrating from expensive urban markets to suburban areas of mid-size cities. However, supply is still low, especially for "starter homes" at lower price tiers, which means sellers can demand a premium in many markets.

Due to low supply, first-time buyers face less affordable conditions, but home building is expected to grow at the fastest rate in over a decade. However, it may take a while for this new inventory to provide some relief. The bidding wars are likely to continue in markets with good jobs, good weather, and access to urban centers.

The housing market is in the midst of a normalization period, one that is characterized by slowing price growth, moderate sales, and new supply that is going to slow the market down a bit. We'll dive into each of these trends below with more detail. Here's what to expect whether you're buying, selling, or sitting tight in 2022.

Many economists agree a 2008 repeat in 2023 is very unlikely While Covid-19 stopped many foreclosures, which will probably show up in 2023. Banks are experts in getting rid of their REOs at a much faster pace, than they did in 2008. The positive trends in unemployment and economic growth over the past year can always reverse, many of the symptoms that led to the major housing market crash in 2008 aren't present today.

Here's a brief recap of the housing crash in 2008:

The Subprime mortgage crisis led to a record decline in home values, about 30 percent from the peak (that's a lot). Risky lending practices encouraged people to take on more housing debt than they could afford. This led to a record number of foreclosures as many homeowners failed to keep up with monthly payments. As more people began to foreclose on their homes, the supply of homes for sale rose dramatically while the demand to purchase homes fell causing home values to crash.

Why is 2022 different than 2008?

We have tighter lending standards with the number of people unable to pay their mortgage at its lowest rate in over a decade.
Households have more disposable income and less debt, bolstered by low unemployment.
Housing supply is significantly lower than pre-crisis conditions where there was "over-building" before prices crashed in 2008.

If you're waiting for a big crash to bring prices down, many economists believe you're more likely to see slower or flat growth in home prices but not the major correction from over a decade ago. A weaker U.S. economy and/or a rise in rates could easily trigger a bumpy housing market. But there's no evidence that a slump to the magnitude of last decade's crash is imminent, even under the worst-case scenario. Alternatively, if a housing market crash is your primary concern for avoiding a home purchase, then it may be better to focus your search on a home you can comfortably afford rather than trying to predict the market and overextend your finances.

Homebuyer budgets appear strong

Thanks to Covid-19 a shift in employment has taken place. Thanks to social media being at its peak. More and more millennials or computer savvy individuals are now self-employed working from homes. More Millennials expected to enter the market. Steady job growth and an increase in the median wage continue to fuel housing demand. Aside from rising wages, another good sign of financial health is spending less disposable income on repaying debts like credit cards, auto loans, and personal loans. Today, household budgets continue to be the strongest they've been in over 40 years and a far cry from 2008, suggesting consumers have more disposable income to buy a home.

The homeownership rate among Millennials hit a record low in 2016, but it's since picked up steam as moderate rates and softening home prices have led more renters to become buyers. According to Realtor.com, 4.8 million millennials are hitting the peak home buying age this year. For the first time ever, Millennials' share of mortgage originations is expected to surpass 50 percent, outnumbering Gen X and Baby boomers combined.

Recent census data show that Millennials are leaving big cities for cheaper housing and better schools. What's different from [past migrations] is that growth is far more selective limited to suburbs blessed by good weather and good jobs, largely in the Sunbelt, where they are growing more than twice as fast as neighboring cities.

It's fair to assume there will be an influx of new first-time home buyers in 2022, but it may not be the boom many hoped for. Recent census data also show that all age-groups are moving at the lowest rate since the 1940's with the steepest drop among younger groups This data is just to help you decide whether it is a good time for YOU to buy or sell your home. Either way, I'm here to help.