With many tenants facing increasing rents in 2022, it is possible consumers may turn to home buying for financial security and as a hedge against inflation soon. In 2021, 34% of primary residence buyers were first-time buyers. This was an uptick from 2020 when it was 31% of the market. The increase last year can be credited in part to a rise in family help with downpayment gifts and loans as well as the influx of young adults aging into the typical first-time buyer range of 28 to 33. With steep rental increases expected this year, high-income earning renters may turn to home buying.
As savvy consumers are learning, it is likely that the 30-year fixed interest rate will increase in 2022. NAR forecasts the rate will rise to 3.9% by the fourth quarter of 2022. As rates increase, some may find it difficult to enter homeownership. However, as rates grow incrementally, there may be a rush to lock in lower rates. The key, however, will be finding inventory.
Inventory has now declined to only 910,000 units on the market, equivalent to 1.8 months of supply. Both are the lowest levels recorded since 1999. NAR forecasts that overall year-end 2022 seasonally adjusted home sales will total 5.950 million units, which is down by 2.8% year-over-year. Demand for repeat buyers to purchase a new home, and first-time buyers to purchase a home is apparent, but it is impossible to purchase what is not for sale.
The coming year will likely continue to see housing demand driven by evolving workplace patterns as well as demographic factors. As CEOs struggle to retain talent amid the Great Resignation, more may be motivated to permit remote work or hybrid schedules. Many employees have been in holding patterns during the pandemic as CEOs allowed remote work temporarily. The permanence of these decisions may spur some to move either to farther suburbs and small towns, or back into city centers.
Lastly, a trend that accelerated during the pandemic was the desire to be close to friends and family and have support systems close. This shift has motivated homebuyers to seek neighborhoods where friends and family are just a walk away or reachable within a short drive. The desire to be close to one’s community has jumped to the number one reason to sell. This trend is unlikely to change as home prices increase, or mortgage rates nudge upward.
