The U.S. housing market remained in a unique position in 2021 during the continuation of the COVID-19 pandemic. Home sales reached a peak in 2021, with an estimated 6 million homes sold throughout the year. Mortgage rates hit historic lows, great news for buyers in a highly competitive seller’s market. The average home price skyrocketed almost 20%, with homes selling at record speeds. In addition, buyers were paying significantly above the asking price—and Virginia was no exception!
As we open 2022, housing experts, buyers, and sellers wonder where the real estate market will head this year. Let’s explore some predictions for our housing market here in Virginia:
A modest increase in inventory
During 2021, housing inventory remained low across Virginia and the rest of the nation. COVID-19 and its associated labor and supply shortages are largely responsible for this years-long trend. Although some experts expected to see a continually gradual increase in housing inventory while the industry recovered from the pandemic, late 2021 showed a sharp decrease in inventory in Virginia. According to Virginia REALTORS® President Denise Ramey, “Local housing markets across Virginia continue to see strong buyer demand, but very low inventory remains a challenge. It will continue to be a strong sellers’ market as we head into 2022.”
Since the housing industry still has recovering to do, increases in inventory will depend on the resolution of both labor and supply shortages that currently plague many industries. The variants of COVID-19 and ongoing restrictions may also impact the availability of homes in 2022. Expect house prices to remain high and competition to remain strong, although there is hope that 2022 will see some recovery.
A return to urban living
We anticipate that the demand for homes in city and urban areas will rise slightly, especially in areas of high employment. In the past year, there were changes in the location of home purchases due to the pandemic. The urban markets had less impact due to the work from home and “Zoom movement.” In addition, people didn’t want to live in densely populated communities because of the virus. We anticipate a slight shift back towards a pre-COVID era, as people begin to return to the office, school, etc.
Of course, this trend is largely dependent on COVID-19 variants and their spread. The closer we get towards a pre-COVID normal, the more that urban markets within Virginia will thrive.
Rising home prices
Those looking to buy and sell in 2022 wonder what’s to come. Will there be a continual rise in home prices or will the housing market crash? Experts anticipate that home prices will continue to rise in many markets across Virginia. Virginia REALTORS® forecasts that housing prices will increase about 4.1% in 2022, which would be typical for year-by-year appreciation.
An uptick in mortgage rates
Mortgage rates are trending upwards and are expected to continue rising. According to CNN Business, the Federal Reserve has signaled that their pandemic monetary policies may end soon. This prediction seems to be unanimous across the board, as the Director of Housing and Commercial research at the National Association of Realtors has also indicated we will continue to see a rise in interest rates on homes in 2023.
Virginia REALTORS® predicts that the 30-year fixed-rate mortgage will rise from 3.10% in December of 2021 to 4.0% by the end of 2022.
Only time will tell
As we plunge into the new year, remember that only time will tell how 2022 will play out. If you feel at a disadvantage in the current market, know that you aren’t alone in the buying, selling, or renting process. Our team of experts understands the local markets in Virginia and help you make the best decisions for you and your future home!