These 8 Trends Will Dominate Real Estate in 2022. Here’s How to Make Sense of Them (2022)

Real Estate

First Time Home Buyers

by Brittany Anas

Brittany Anas

published Jan 11, 2022

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These 8 Trends Will Dominate Real Estate in 2022. Here’s How to Make Sense of Them (1)

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The 2021 real estate market was like a high-speed rollercoaster ride for buyers — one full of twists, turns, and upside-down loops. While the wild ride isn’t over just yet (sellers still have an advantage going into 2022), the market could ease up a little on first-time buyers, according to real estate experts. To help you better navigate buying a home in the year ahead, we’ve pinned down eight trends that analysts expect will shape the real estate market. And with those trends in mind, real estate agents and mortgage experts relayed their best tips for first-time buyers.

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From the continued demand for more living space to first-time buyers snapping up vacation rentals, here are the trends that will shape the 2022 homebuying market.

The last two years have been a doozy, and that’s putting it lightly. In 2022, thoughtful wellness designs will be prominent in homes, and some of them will come at a premium, like spa-inspired bathrooms and meditation rooms, according to Zillow. Natural light will be a priority, especially in home offices and common spaces, according to the real estate site. Expect to see homes staged with indoor plants, too.

The numbers: A freestanding bathtub can lead to a 2.6 percent premium on a home’s sale price, according to Zillow.

The advice for homebuyers: Want to let the light in on your next home? “Typically, a south-facing home has better natural light,” says Cindy Chen, a licensed associate real estate broker with Compass in New York City. “But it also depends on when you will be in the home most often and wanting light. Eastern exposures will have more morning light, while homes with western exposures will work well in the afternoon.”

Exposures are fixed features and harder to change, she says, but keeping windows clear of clutter will give apartments more natural light. If the natural light is still not sufficient, you can hang mirrors that reflect light into the apartment or only use sheer window treatments without heavy curtains, Chen says. Otherwise, if the building allows renovations, replacing existing windows with larger ones will certainly give your place more light.

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Housing affordability issues will be a mixed bag.

In 2021, historically low mortgage rates that, at times, dipped below 3 percent, helped offset the higher listing prices. In 2022, experts predict both home prices and mortgage rates will go up. So too will income, continuing the “good news/bad news” dynamic.

The numbers: Realtor.com expects that mortgage rates will hover at an average of 3.3 percent throughout 2022, inching up to 3.6 percent by the end of year. Meanwhile, existing home sales prices will continue to increase, rising 2.9 percent in 2022. The silver lining? A bettering economy (by the usual indicators, at least) should be propelling income growth of 3.3 percent by the end of the year, according to Realtor.com.

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The advice for homebuyers: Do your research to find lenders that have a good combination of low rates and low fees, then apply for mortgage pre-approval — not just a pre-qualification — from at least three of them, recommends Kate Wood, home and mortgage expert at NerdWallet.

“Each lender will give you an offer in writing that shows you the size of a home loan you could potentially get, an interest rate that’s customized to you and a breakdown of their fees,” she says. “Taking the time to comparison shop could save you hundreds of dollars each year in interest, which would really pile up over the life of the loan.”

The outlook for buyers may improve, but it remains a seller’s market.

Inventory will remain squeezed and 2022 will continue to be a seller’s market, according to experts. But Realtor.com analysts predict the market will rebound from 2021 lows, with inventory growing 0.3 percent on average in 2022.

The numbers: A good way to take a pulse of the market is the number of days a home is on the market. Right now, homes are on the market for a median of 49 days, which is less than a typical winter month, when the market time is 85 to 100 days, according to HousingWire.

The advice for homebuyers: Give yourself some wiggle room on what you can afford so that, if need be, you could go over asking for a home you love. Another tip? “Look at homes that have been on the market for more than 21 days,” says Marilyn Emery, a real estate agent with RLAH Real Estate in Montgomery County, Maryland, and Washington, D.C. “Many of these homes started off overpriced but have lowered their price. Buyers often think there must be something wrong with these homes, so they don’t even bother to go and see them. However, there are many hidden gems out there if you just take the time to look.”

First-time buyers are scooping up ‘second homes’ before primary residences.

For a wildcard trend, Zillow predicts that Gen Z and Millennial buyers, who are savvy watchers of the market, will be interested in purchasing what would traditionally be considered “second homes” before investing in a primary residence. The reason? Remote work means many in these generations are no longer tethered to big cities, and they’re looking for more affordable destinations to live in. Still, this cohort of first-time buyers might not be entirely ready to make a full-time move. Owning a part-time vacation home or an investment property could potentially help them build equity during the interim.

The numbers: The average long-distance mover relocated to a ZIP code with home values nearly $27,000 lower than where they came from last year, according to a 2021 reshuffling report from Zillow.

The advice for homebuyers: If you buy a rental property before buying a primary residence and you’re applying for financing, you’ll likely need to bring a sizable down payment to the table.Most investment properties require 20 to 25 percent down to get a home loan as opposed to the 3.5 percent downthat a first-time homebuyer could qualify for through the FHA, explains Jerimiah Taylor, a licensed broker and vice president of real estate and mortgage services at real estate tech firm OJO Labs.

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Buying a starter home may be more affordable than renting in some markets.

It’s a bit of a catch-22: Because home prices are so high, there’s a heightened desire to rent as would-be buyers wait until the market cools. But now the increased demand for rental units (especially ones that are big on square footage) is driving up rent around the country, according to Realtor.com.

The numbers: Buying a “starter” home is more affordable than renting in 24 of the 50 largest metro areas. In these markets, the monthly cost to buy was 15.5 percent ($216) lower than renting, on average, according to Realtor.com. Among the markets where it looks to be more affordable to buy than rent are: Birmingham, Alabama; St. Louis, Missouri; Pittsburgh, Pennsylvania; Orlando, Florida; and Cleveland, Ohio. In tech cities like Austin, Texas; San Jose, California; and San Francisco, California, it’s still more affordable to rent than buy.

The advice for homebuyers: If you’re considering whether to transition from renter to homeowner, keep in mind that expenses will likely be higher when you buy. “A renter is typically not paying to cut the grass, shovel the snow, or dispose of the garbage,” says Jorge Rivera, regional vice president of sales for William Raveis Mortgage. “They are also typically limited in [paying] repair costs.Creating a reserve fund with weekly or monthly deposits is a great way to prepare for big ticket repair items [as a buyer].”

Demand for more space (inside and outside) will continue.

Wanting more space amid COVID, people traded dense urban areas for sprawling suburbs. The ‘burbs continue to remain in high demand, and new construction homes are getting bigger.

The numbers: The number of Realtor.com viewers of suburban home listings has gone up 42.1 percent since the onset of COVID. Single-family home sizes are also trending bigger. According to Census data and an analysis from the National Association of Home Builders, the average square footage for new single-family homes increased by 6.2 percent, to 2,541 square feet, since Great Recession lows.

The advice for homebuyers: Get in touch with homebuilders in your area to see what projects they have coming up, recommends F. Ron Smith, a Compass real estate agent with Smith & Berg Partners in Brentwood, California. New construction homes, he says, typically have more light and lots more indoor-outdoor flow than older homes.

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Buyers are making compromises.

Because inventory remains low in this super competitive pandemic housing market, those “dream homes” that tick all the boxes of your priorities (and wants, too) are elusive.

The numbers: Eighty-one percent of buyers have had to make one or more compromises when buying in this sizzling hot market, according to Zillow. Nearly three quarters of homeowners are considering a home improvement in the next year, per Zillow, with renovating a bathroom (52 percent), kitchen (42 percent), or adding or improving a home office space (31 percent) as the top projects.

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The advice for homebuyers: If you’re facing some indecision when it comes to whether or not to make an offer, Realtors love the 80 percent rule, says Megan Gallagher, Realtor with the DEN Property Group in Austin, Texas. It means if a home meets 80 percent of your criteria, you should make a bid. “We suggest you list out 10 important features, and if they’re all of equal priority then you can use the 80/20 rule,” she says. “If you have some higher priority items, then you should really be focused on those and know that everything else can be a compromise.”

Homebuying will cost time, too.

Not only is the homebuying process a financial investment, but it’s also something you’ve got to budget the time for — especially in this fast-paced market. In fact, the average first-time homebuyer tours 15 homes in person or virtually, according to an Opendoor report. But 33 percent toured 20 or more homes.

The numbers: According to Opendoor, 79 percent of first-time homebuyers who missed work during the homebuying process had to take off an average of 14 hours for their search.

The advice for homebuyers: Sometimes listing photos can be deceiving, says real estate agent Yawar Charlie with the Aaron Kirman Group at Compass in Beverly Hills, California.

“You have to truly see things in person to appreciate them and see if you connect with them,” he says. “My approach is if the neighborhood is right for you, go see the house. Assess for yourself whether it’s the right fit for you in person.”

How-To Toolkits

FAQs

What will happen to property market in 2022? ›

Further rate rises are expected throughout 2022, which could dampen the housing market because it means mortgage repayments will increase. The cost of living crisis is likely to be the biggest cause of a slowdown in the housing market.

What is the hottest housing market in 2022? ›

20 Hottest Real Estate Markets 2022 (Updated June)
Hottest MetrosHotness RankMedian Days on Market
Concord, NH113
Manchester, NH212
Burlington, VT316
Portland, ME420
16 more rows
4 Oct 2022

Is there going to be a housing crash? ›

There is growing speculation that the housing market could crash in 2022. High interest rates coupled with the cost of living crisis has seen households squeezed as they try to afford rising energy, fuel costs and now mortgage payments.

Will house prices fall 2022? ›

The current economic conditions mean that it is growing increasingly likely house prices will start to fall in 2022.

Is 2022 a good time to buy a house? ›

Less Competition For Homes For Sale

Another reason Fall 2022 is a good time to buy a home is that competition for homes is lower. According to the National Association of REALTORS®, more sellers have homes for sale than during any point in the last twelve months.

Do house prices ever go down? ›

In the June quarter the average dwelling prices fell 2% across Australia. But given real estate is all about location, the price changes were quite varied. In New South Wales they fell 3.8% while in Queensland prices were mostly flat. South Australia on the other hand saw a solid 3.6% growth.

Where are houses appreciating the fastest? ›

The 18 Hottest Housing Markets In The US
City/StateMedian Selling PriceState House Price Index Increase (Q4 2020 – Q4 2021)
Bakersfield, California$365,00019.08%
Aurora, Colorado$440,75119.71%
Jacksonville, Florida$270,02324.47%
Charlotte, North Carolina$354,88420.70%
14 more rows
21 May 2022

Which state has the hottest housing market? ›

1. California. The Golden State has the strongest real estate market in 2022, ranking well in terms of income levels, new construction rates, and available homes. California's housing inventory is at 27,227 and new constructions at 117,219, suggesting a healthier supply of houses compared to other states.

Which city has the hottest housing market? ›

10 Hottest Housing Markets in America
  • 10 Hottest Housing Markets in America. 2022's hottest real estate markets. ...
  • Tampa, Florida. ...
  • Jacksonville, Florida. ...
  • Raleigh, North Carolina. ...
  • San Antonio, Texas. ...
  • Charlotte, North Carolina. ...
  • Nashville, Tennessee. ...
  • Atlanta, Georgia.
16 Feb 2022

What triggers a housing crash? ›

Forces that make a housing bubble pop include a downturn in the economy, a rise in interest rates, and a drop in demand.

Is a housing crash good for buyers? ›

Recessions and the housing market

During a traditional recession, the Fed will usually lower interest rates. This creates an incentive for people to spend money and stimulate the economy. It also typically leads to more affordable mortgage rates, which leads to more opportunity for homebuyers.

Should I sell my house now? ›

With continued supply shortages and high buyer demand, now is a good time to sell your home. And with interest rates on the rise, it may be better to sell sooner rather than later — if rates spike much more, some prospective buyers may retreat from home shopping. But consider your reasons for selling carefully.

What happens if the housing market crashes? ›

Homeowners owe more on their mortgages than their homes were worth and can no longer just flip their way out of their homes if they cannot make the new, higher payments. Instead, they will lose their homes to foreclosure and often file for bankruptcy in the process.

Will house prices crash in 2023? ›

Independent economic research consultancy Capital Economics has warned rising interest rates could trigger house prices to go into reverse, suggesting they'll drop by around 5% in 2023 and 2024. While they predict house prices will drop in 2023, they've also suggested price growth will remain strong in 2022.

Will house prices Drop 2023? ›

As economic conditions continue to impact the country, industry experts are suggesting there will be less demand in 2023 which will likely result in house prices falling.

Will 2023 be a good year to buy a house? ›

Housing experts say they're expecting the market to tip back into buyers' court by 2023, according to a new report. Mortgage rates are approaching 7%, but home prices are only slowly coming back down and inventory is still tight compared to pre-pandemic levels.

What are the best months to buy a house? ›

Lowest Home Prices Are Typically in January

Similarly, prices jumped from $376,559 in January 2022 to $424,146 in April 2022. The rise in sales prices between the winter and summer months is drastic, making the winter months a much more optimal time for homebuyers to purchase properties.

What is the best time to buy a house? ›

Outside of winter, a fall purchase can be ideal for cash-strapped home buyers. Once summer ends, sellers get more motivated. They usually lower their prices and provide an opportunity to get a deal. As is the case with winter, there's also less inventory during the fall.

How does war affect housing market? ›

Conflicts and market volatility tend to push investors towards safer asset classes like treasury bonds and mortgage-backed securities. These things could dampen the rise we've been experiencing in mortgage rates and even go as far as putting downward pressure on them.

What would cause a house price to drop? ›

The main factors that cause a fall in house prices involve: Rising interest rates (making mortgage payments more expensive) Economic recession / high unemployment (reducing demand and causing home repossessions). Fall in bank lending and fall in availability of mortgages (making it difficult to buy).

What type of house sells the fastest? ›

Low Price Point. With the homeownership rate nationally approaching a 50-year low, home buyers are becoming more prudent. Houses listed between $200,000 and $250,000 sold in about 83 days, faster than those in any other price range. That's compared to 133 days for homes priced between $2 million and $5 million.

What type of house appreciates the most? ›

Answer: Since 2012, the data is clear – single-family homes appreciate the fastest, followed by townhouses/duplexes, and then condos. Since 2012, the average single-family home has appreciated 69% compared to 27% for condos.

What state has the best houses for cheap? ›

Top 10 cheapest states to buy a house in 2022
  • Ohio.
  • Nebraska.
  • Kansas.
  • Mississippi.
  • West Virginia.
  • Oklahoma.
  • Michigan.
  • Arkansas.
14 Sept 2022

What state is best to buy a house? ›

Tennessee is the cheapest state to buy a house in 2022. Oregon is the most expensive state to buy a house in 2022. $514,568 was the average house price in the United States in Q4 2021.

Which state has the biggest housing crisis? ›

California currently has the largest deficit of homes at 978,000, while Mississippi fell short by 1,000.

What city has the best looking houses? ›

Ten Cities And Villages With The Most Beautiful Homes In The...
  1. Birgu, Malta. Birgu is crowned the city with the most beautiful houses. ...
  2. Bibury, England. ...
  3. Tuscany, Italy. ...
  4. Ghent, Belgium. ...
  5. Visby, Sweden. ...
  6. Mykonos, Greece. ...
  7. London, England. ...
  8. San Francisco, USA.

What is the Best State to buy a House 2022? ›

Iowa. Iowa came in at the top of our list of the most affordable homes in America. It takes a mere 10.6 percent of the median household income to afford a home in the Hawkeye State. Homes clock in at just $147,800.

Where in the US is the most affordable housing? ›

The Motor City tops the list of most affordable places to buy a home.
...
1. Detroit, Michigan.
Median home listing price in 2020$59,000
Median real estate taxes$1,268
Average state income tax4.25%
Monthly utilities$290
Annual food cost$8,277
2 more rows
13 Oct 2022

Are house prices expected to rise in 2022? ›

Assuming national lockdowns are behind us, we predict average UK house prices will grow by 4.0% and London by 3.0% in 2022. With the UK prices expecting to settle at 2.0%-3.0% per annum over the following four years.

Will house prices rise 2022? ›

UK house prices to grow by up to 7% in 2022, forecasts Strutt & Parker While Prime Central London to rise by up to 10% next year.

Will house prices Drop 2023? ›

As economic conditions continue to impact the country, industry experts are suggesting there will be less demand in 2023 which will likely result in house prices falling.

Will property prices fall in 2024? ›

New housing demand will pick up in the next 18 to 24 months as rising wages and falling prices combine to improve the affordability problem keeping buyers out of the market, says Stockland chief executive Tarun Gupta.

What happens if the housing market crashes? ›

Homeowners owe more on their mortgages than their homes were worth and can no longer just flip their way out of their homes if they cannot make the new, higher payments. Instead, they will lose their homes to foreclosure and often file for bankruptcy in the process.

Should I sell my house now? ›

With continued supply shortages and high buyer demand, now is a good time to sell your home. And with interest rates on the rise, it may be better to sell sooner rather than later — if rates spike much more, some prospective buyers may retreat from home shopping. But consider your reasons for selling carefully.

What will a recession mean for house prices? ›

During a recession, it is possible to see an increase in the rates of foreclosure, flat or declining property values and houses staying on the market for longer before they are sold.

Will prices go back down? ›

“Projected inflation levels over the next five years range from 2.3%-2.9%, so prices shouldn't stay elevated as they are indefinitely,” Rosen said. “We expect to see decreases across the board as we go into 2023 and should hope to end 2023 around 3% inflation.”

What will house prices be like in 2030? ›

Prices Will Be Much Higher

It's almost a given that in spite of current high prices, houses will cost even more 10 years down the line. According to RenoFi, the cost of a single-family home in the U.S. is likely to hit $382,000 by 2030.

What will my house be worth 2030? ›

According to RenoFi, the average price of a single-family home in the U.S. could reach $382,000 by 2030. Depending on where you live, this figure may seem like a drop in the bucket compared to the home prices in your city.

What will happen to property prices in 2023? ›

Would falling house prices improve affordability for prospective buyers? Economic consultancy Centre for Economics and Business Research (Cebr) said it expects house prices to fall by 4.5% on average next year, with a peak annual contraction of 6.2% expected in Q3 2023.

Will my house be worth more in 2023? ›

Between May 2022 and May 2023, Zillow predicts U.S. home prices will jump another 9.7%. While that would mark a significant deceleration from the 20.4% posted over the past year, it would hardly be a relief for buyers.

What will house prices be like in 2024? ›

Over the coming year, Zillow predicts that U.S. home prices will rise another 2.4%. Goldman Sachs predicts that U.S. home prices will rise 1.8% in 2023 and 3.5% in 2024.

Will house prices go up in 2024? ›

A forecast from Oxford Economics predicts that real estate prices will fall by 24% by mid-2024. Director of Canada Economics at Oxford, Tony Stillo, explained that the first reason behind this potential crash is house prices themselves.

What Are house prices going to do in 2024? ›

Our new, higher, interest rate forecasts mean that we now expect house prices to fall marginally in 2023 and 2024. While there are risks on both sides, our base case is that prices drop by 5% overall, reversing a fifth of the surge in house prices since the pandemic began.

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