What kind of market can we expect in 2022?
The Housing Market in 2021
The total value of the residential real estate market grew by a record amount in 2021 – $6.9 trillion – to $43.4 trillion. (Source: Manhertz) This value gain comes from an increase in home values due a decrease in inventory (less supply puts upward pressure on pricing). More new homes were built in 2021 than any year since 2007. In addition, low mortgage rates and lifestyle changes due to Covid-19 contributed to the hot market.
Home sales were up 19% in DC and 23% in Montgomery County MD.
Real gross domestic product (GDP) increased at an annual rate of 6.9% in the last quarter of 2021 and increased 5.7% in 2021. (Source: BEA)
What can we expect in 2022?
Higher mortgage rates
Real estate agents feel like broken records saying this, but… mortgage rates should rise in 2022. Given the inflation in the market and the Fed talking about increasing its interest rates, we should see banks increasing mortgage interest rates as well. NAR is predicting 3.6% mortgage rates by the middle of the year (for 30 year fixed mortgages).
Sellers market will continue
Demand is still high in the DC metro area and it is predicted to remain this way. We saw some easing in the fall market. We are hoping to see the market continue to normalize to its regular seasonality, but demand is still higher than the “good ole” pre-pandemic days. Home prices are at records highs. The median home price in DC is $700,000 and $550,000 in Montgomery County.
Even as we normalize, prices are not going to decrease. Given our low inventory, prices will still increase, just not as quickly. This is important for people to realize.
Inventory will continue to be limited
The shortage of housing inventory is a national problem. Maryland has 96.5% of the housing supply that it needs, which translate to missing 82,478 homes. (May)
What are the unknowns to watch?
- The continued impact of Covid-19,
- inflation and government activity to stabilize it,
- and interest rates.
A Plug for ADUs
There is serious value in the creation of Accessory Dwelling Units (ADU). These are units on the same lot as an existing house. They accomplish a lot of different things – as housing prices rise, it allows people to stay in their neighborhood, they generate rental income for homeowners, they provide housing for adult children or aging parents to live with their family, and they provide affordable housing in high cost neighborhoods. The Maryland Realtors organization is supporting legislation to allow ADUs this year. There are people who resist them due to anti-growth or neighborhood character “reasons.”
Treh Manhertz, Zillow, “US Housing Marketing has Doubled in Value since the Great Recession, Gaining $6.9 Trillion in 2021.” https://www.zillow.com/research/us-housing-market-total-value-2021-30615/
BEA, “Gross Domestic Product, Fourth Quarter and Year 2021.” https://www.bea.gov/news/2022/gross-domestic-product-fourth-quarter-and-year-2021-advance-estimate#:~:text=Current%2Ddollar%20GDP%20increased%2010.0,(tables%201%20and%203)
Nadia Evangelou’s, NAR Research, “Four Things to look for in the Washington DC area in 2022,” Capital Area Realtor magazine, Jan/Feb 2022.
Anirban Basu, Sage Policy Group, “2022: Infection, Inflation, and Interest Rates?”, Maryland Realtor magazine, Feb/Mar 2022.
Lisa May, “Where Have All the Houses Gone? … and how do we get them back?,” Maryland Realtor magazine, Feb/Mar 2022.