The COVID-19 pandemic came with a number of challenges, and most of us expected to see a significant economic downturn as a result. However, the housing demand was higher than ever and the market was surprisingly competitive in the last couple of years. While the situation has died down a bit this year, advanced planning, a smart strategy, and good stamina will still be needed. If you’d like to purchase a house in 2022, here’s what you can expect:
Tough competition
The demand for houses only continues to increase. There’s a shortage of properties on the market, but a high number of eager buyers are willing to jump in. Many of them are also taking advantage of the increase in remote work opportunities after the pandemic, having more flexibility to work from and move anywhere. Not to mention that Millennials have finally reached the prime homebuying age, making up the largest percentage of buyers. With that in mind, it’s recommended to be prepared and get ready for a bidding war, especially if you’re purchasing a starter home.
Higher expenses
At the moment, house prices are rising slowly and this isn’t likely to change in the near future. However, the increasingly tough competition has raised the overall expenses for homebuyers. Individuals are continuing to increase their offer prices, they’re waiving contingencies, and adding in escalation clauses, all of which makes buyers more competitive. This means you could end up being outbid quickly, thus making it even more difficult to buy the right house. While you could utilize the same methods as well, saving money for a higher downpayment is also advised.
Deceptive insurance
Home insurance is a necessary aspect of the buying a house process that is often required by mortgage lenders. But even though it’s supposed to help keep your house safe and secure, many insurance providers have lately been selling unnecessary insurance using unethical and deceptive practices. For instance, consumer credit insurance (CCI) is often sold to consumers, aiming to protect them in case an unexpected circumstance prevents them from making payments. More often than not, this is just worthless add-on insurance of no real value. If you’ve purchased this insurance as well, you can easily claim a CCI insurance refund to get your money back. If not, read each policy carefully before making the final decision.
Higher mortgage rates
In the last few years, we have been lucky enough to witness historically low mortgage rates and quite favorable terms. Unfortunately, that is slowly changing as well. On average, 30-year loan rates are expected to increase around 3-4% throughout the year. While this might not seem like a significant increase initially, it will impact monthly payments for most homebuyers and possibly make homeownership unattainable for others. Of course, purchasing a house in the future won’t be impossible, but it will come at a higher price point. That is why you might want to consider a preapproval as soon as possible.
Limited choices
Construction and housing starts have increased, and a higher number of foreclosures are hitting the market as well. But there likely won’t be a particularly major surge in the houses available for sale. As the housing market’s supply is noticeably short of demand, many hurdles are yet to be overcome. You may need to make some compromises when buying a home, such as considering smaller houses, looking into alternative property types, or geographically expanding your search.
Slower appreciation
As already mentioned, house prices aren’t expected to rise quite as quickly as in previous years. While that could be of help in the beginning, it also means your home will appreciate slowly once you finally manage to purchase it. As a result, it could take a while before you see a good return on investment. This doesn’t necessarily mean you won’t make a profit if you plan on selling the home in the next few years, just that you won’t reap a windfall. You can expect house prices to appreciate anywhere between 2% and 7%.
Purchasing a house is clearly a bit simpler in 2022, but you can still face a number of challenges. Thankfully, many of them can be overcome with some advanced preparation and a solid plan.
