Why the U.S. Housing Market Might Be Better for Buyers in 2022

Real estate agent shirts

It’s no secret that home buyers in the U.S. have had a tough time in 2021. Tight inventory commissions and fast-rising prices have presented challenges for buyers all across the country. Now, as we approach the fall of 2021, many are wondering if there’s any relief in sight.

Which begs the question: Will the housing market be better for home buyers in 2022?

Recent reports have offered a glimmer of hope for buyers in the U.S. These reports have shown an increase in the number of houses for sale, along with a general cooling trend within the housing market. If these trends continue going forward, the real estate market could be better for home buyers in 2022.

Real Estate Market Better for Home Buyers in 2022?

More inventory to choose from, a slower pace, and moderating price growth. Those are just three of the reasons why the housing market might be better for home buyers in 2022.

1. There might be more properties to choose from.

In early September, Realtor.com published a real estate market report for the nation as a whole and the 50 largest metro areas. This report showed that there have been more properties coming onto the market in recent weeks.

According to Realtor.com, new real estate listings rose by around 5% in August 2021 compared to a year earlier. In some major cities, like Cleveland and Columbus, new listings rose by more than 20%.

This is one of several recent reports that have shown an increase in housing market inventory. If this trend continues through the rest of this year, the housing market could get a lot better for home buyers in 2022.

Related: Supply growth could shift the market

According to Danielle Hale, chief economist for Realtor.com:

“This month, new sellers added more affordable entry-level homes to the market compared to last year, while others began adjusting listing prices to better compete with an uptick in inventory.”

2. The real estate market could cool down a bit next year.

Several recent reports have shown that the housing market is starting to cool down a bit, compared to the overheated frenzy of late 2020 and early 2021.

One of those reports came from Redfin, a national real estate brokerage. The company reported a 6% drop in home sales in August 2021, compared to the same month last year.

Similarly, the National Association of Realtors reported a measurable decline in pending home sales during the summer months.

These and other indicators suggest that the real estate market might be cooling off a bit. High prices could be one reason for the reduction in sales. House values nationwide rose steadily over the past year, pushing some buyers out of the market. This has reduced demand across the board, resulting in fewer sales.

If this general cooling trend continues, the housing market could be better for home buyers in 2022. We might not see such “frenzied” real estate activity next year, as we’ve seen in previous months. The housing market might move at a slightly slower pace. This would reduce the pressure on buyers, by easing competition.

According to Lawrence Yun, chief economist for the National Association of Realtors:

“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers. Inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”

3. Home price growth might begin to slow down.

We’ve seen an insane level of home-price appreciation over the past year. Some of the hottest real estate markets, like Austin and Boise, have experienced annual price gains of more than 30%. That is miles above historical averages going back 40 years.

Fast-rising prices have also made things harder for home buyers across the U.S. Many buyers have found themselves priced out of the market all together, or unwilling to enter the fray.

The tremendous home-price gains of the past 12 to 18 months are not sustainable. House values simply cannot rise at that pace for much longer. In fact, we are already seeing signs of a slowdown in home-value appreciation nationwide.

Researchers from Freddie Mac predicted that house prices in the U.S. would rise more slowly in 2022 than the current year. In a forecast issued earlier this year, they predicted that U.S. home values would rise by around 12.1% in 2021, followed by a more modest gain of 5.3% in 2022.

To quote their report:

“The rapid run up in house prices may be starting to exhaust potential home buyers. We’ve seen indications of softening demand in recent home purchase mortgage applications data.”

In some real estate markets, home prices might actually begin to level off in 2022. This is another reason why the housing market could be better for home buyers in 2022. Slower price growth would enable more buyers to enter the market and find a suitable property within budget.

Disclaimer: This report includes real estate predictions and forecasts. Such views are the equivalent of an educated guess and should be treated as such.