Home Purchase in 2022: What to Expect
If getting a house is in your plans and you sat out last year, you will surely want to know your prospects this year. Is it wiser to buy now or wait some more? Is it better to buy a newly built house or an existing house? How about buying a lot and then building a house on it? It is best to get as much information as possible to arrive at a well-thought-out decision.
According to CNN, the National Association of Realtors (NAR) reports that the median price in 2021 was $346,900. This was a record high and an increase of 16.9 percent compared to 2020. Federal Housing Finance Agency data show that in the third quarter of last year, housing prices increased by almost 20 percent over the third quarter of the previous year. The Mortgage Reports stated that by the end of 2021, the national median price of a house, according to data from the U.S. Census Bureau, was $416,900.
This year, Zillow predicts an 11 percent increase in housing prices. Some realtors told Houzer that they expect a 10 percent increase, while other experts told Zillow that they indicate a 6.6 percent increase. On the other hand, economists told NAR that they foresee a 5.7 percent increase, while Realtor.com has much lower expectations with a 2.9 percent increase.
Mansion Global reports, however, that data from Redfin shows that 2022 started with national median housing prices still shooting up to another record at $365,000 from January 2 to 9. This represents a 16 percent increase over January 2021. It is a classic supply and demand situation because the number of homes listed for sale nationwide was at a record low of 461,000 units in the four weeks up to January 9. That represented a 28 percent decrease over the same period in 2021. Meanwhile, demand increased by nine percent.
However, buyers must realize that prices vary widely across states and cities. For instance, according to MSN, the top five most expensive housing prices are in Salt Lake City, Utah; Boise, Idaho; Spokane and Spokane Valley, Washington; Indianapolis, Carmel, and Anderson, Indiana; and Columbus, Ohio. Stay clear of these areas if your budget is tight.
Some buyers think they can get a good bargain by buying fixer-uppers old houses. If you go this route, you first get a professional house inspection to determine the extent of renovations needed and how much that will cost. It can range from just heating, ventilation, and air conditioning or HVAC repair, which is affordable, to critical structural damage that will need a significant rebuild. Calculate if you will come out ahead or with a loss.
Mortgage Rates and Loans
Another aspect of housing affordability is the prevailing mortgage rate. This determines how much you will be paying for your mortgage monthly. While high mortgage rates mean higher monthly payments, the good news is that this will influence home price increases to slow down. According to CNN, in the last week of January 2022, the average 30-year fixed-rate mortgage soared to 3.56 percent. That represents its highest rate since the pandemic began. In January 2021, it was at 2.77 percent. Mansion Global reports that Realtor.com and Redfin expect it to be at 3.6 percent by the end of 2022, while Bankrate predicts it will reach up to 3.75 percent.
Another option to owning residential property is to buy a residential lot and build a house on it. Some people start buying a lot if they still do not have enough funds to build. Lot prices also vary widely by state and county. Lawn Love ranked counties based on the average price per acre and corresponding estimated property tax. The five most expensive counties to buy a residential lot in are San Francisco County, California; Kings County, New York; Hudson County, New Jersey; Santa Clara Country, California; and San Mateo County, California. The five least expensive areas are Montgomery Country, Alabama; Madison County, Alabama; Horry County, South Carolina; Mobile County, Alabama; and Sussex County, Delaware.
It would help if you researched the cost of home construction in the lot area, including other expenses such as permits and connections to utilities. This can likewise vary widely by state and county. According to The Mortgage Reports, the average cost to build a house in 2022 is $379,000. This excludes the land cost but includes permits, excavation, inspections, and other related expenses.
Keep in mind that builders are now encountering difficulties with high costs of construction materials and appliances, shortages, and delays in deliveries. Computations on cost and construction period may have to be changed several times, resulting in more expenses. These will also become your problems if you opt to build.
Things to Ponder
Given the pandemic’s current uncertainties, home construction can be risky. If you already own a lot, it may be more cost-effective to sell it and add the funds to the home purchasing budget.
Also, since prices are predicted to continue to rise, albeit at a slower pace, purchasing sooner rather than later is wiser. You will then also be able to lock in a more favorable mortgage rate before it goes any higher.