Expect Positive Trends In The Housing Market in 2022
Story by David Howell, CIO, McEnearney Associates
The housing market in Northern Virginia is in great shape, and we expect to see positive trends well into next year.
As the region emerged from the significant real estate downturn in the immediate aftermath of the COVID-induced shutdown in the spring of 2020, the suburban markets have outperformed Washington, DC – and Northern Virginia’s ‘burbs fared even better than Maryland’s.
The biggest challenge this year has been the historic lack of inventory of homes on the market – this is our “supply chain” issue, but it’s for very different reasons that the consumer goods problem we’re seeing nationwide. The simple fact is that people are staying in their homes longer – 15 years ago, the median number of years sellers were in their home was 6, and that has climbed to 10 years now. And housing supply problems won’t be resolved quickly – the cost of new construction is high, and we don’t see anything on the horizon that is going to spur a significant change in the pace current homeowners will sell their homes.
Even the expiration of the mortgage forbearance programs in unlikely to increase overall inventory in any significant way by dumping distressed homes on the market. Most of those who have been unable to pay their mortgages have equity in their homes, and if they need to sell, it’s likely to be a traditional sale. In short, we’re not in a bubble.
Price appreciation has been significant this year – in the range of 10% - and this isn’t sustainable. We’re already seeing that the pace is slowing, but “slowing” doesn’t mean prices are dropping. We expect price appreciation in 2022 to be in the 3% - 5% range.
There are a couple of cautionary notes. It is highly likely that mortgage interest rates will rise next year, climbing for the current levels just above 3% to perhaps as high as 4% by the end of 2022. That’s still a very low number, but rising rates do make homes less affordable. And the market for close-in condos is a bit more challenged than the rest of area because there is more supply than demand, and we expect prices to be pretty flat next year in this category.
And it’s not just our local conditions. That make us optimistic about 2022. There is considerable room for growth in the national economy, with considerably more job openings than there are workers to fill them, and most of the economists we follow expect a full recovery in the job market by the end of 2022. And of particular note for the housing market, there are 9.6 million millennials who will turn 30 over the next 24 months – they are entering the prime homebuying age.
Except for supply, the housing market is in great shape, and 2022 should be a great year for Northern Virginia real estate.
Contact me to get a jumpstart on your buying/selling needs today!