(The Center Square) – With prices increasing more than 10% and inventories tight in 2021, prospective home buyers are wondering what the market holds for next year.
While this past year brought a home-buying frenzy largely fueled by first-time millennial homebuyers, Realtor.com predicts potential homeowners will face increased competition for at least the next three years.
According to Illinois Realtors, the housing market has slowed down considerably heading into next year. Sales in October were down 11% compared to October 2020, but prices continued to rise at more than 5%.
Officials at Realtor.com believe home prices will slightly increase and will remain high in 2022, but Northbrook real estate agent Katie Spaniak disagrees.
“What I do see is that prices are going to come down,” Spaniak said. “The one other thing you need to keep in mind as both a buyer and as a seller is those interest rates are going to go up.”
Fannie Mae projects the average 30-year fixed-rate mortgage will soon see higher rates, averaging 3.3% next year and moving up to an average of 3.5% in 2023.
It also expects the Fed will begin raising interest rates in 25-point increments as early as the fourth quarter of 2022, and could begin even sooner if inflation continues to surge.
Realtor.com predicts housing inventories will continue to be tight in 2022. Spaniak said some want to leave Illinois but can’t.
“People who are in Illinois, a lot of them want to move out of Illinois. Not everyone, but a lot of people are, especially those empty nesters,” Spaniak said. “Part of the problem is that they really have no place to go because the market across the country is so tight.”
Officials at Realtor.com said the suburbs will become increasingly popular compared to big urban metros as home shoppers search for more space, a trend spurred by the pandemic. However, as demand is expected to outpace new construction growth, buyers may have to sacrifice space to affordability constraints.