As we wrap up the first month of the new year, let’s take a moment to briefly summarize 2021 and give thoughts on what to expect for 2022 in the housing market from both a national and a regional perspective.
Mortgage rates hit near historic lows in early 2021, with Freddie Mac reporting the average mortgage rate hovering around 2.7%. As one can imagine, low rates combined with wildly increased demand and an insufficient housing supply have spurred one of the most competitive housing markets in modern history, boosting the median sales price of homes (both regionally and nationally) to historic highs in the process. Existing home median sales prices rose by nearly 15% nationally and 21% regionally. The Reno/Sparks area saw yet another median sales price record at $545,00 for the month of December. To put this in perspective, just one year ago the median price sat at $450,000 (that’s nearly a $100,000 sales price increase in twelve months). Although home prices continue to rise, steadily climbing mortgage rates may cool off the red-hot housing market, with the projections showing an increase in rates of roughly 0.1% each quarter.
Aside from low mortgage rates, the substantial increase in demand can be attributed to the COVID-19 pandemic and drastic changes in the workplace. One study published in June 2021 by researchers at the University of Chicago estimated that 37 percent of jobs (mostly high-paying positions) can be performed entirely remotely. With this in mind, the question in many homebuyers’ minds shifts from, “Where do I have to stay?” to, “Where would I like to live?” As more and more people work from home, the demand for additional living space is expected to grow.
Another driver of the surge in home prices is a lack of housing supply. As economist Matthew Speakman puts it, “Even going into the pandemic, there was a shortage of homes for sale. From 2010-2019 we had the lowest amount of homes built than any decade since the 1960s.” With building costs still high and skilled labor becoming sparse, housing is simply not being built at the rate necessary to keep up with strong demand and a growing US population.
For Reno/Sparks in 2022, expect rising mortgage rates to slow down appreciation rates. Local experts predict to see between 8 and 10 percent appreciation regionally in 2022, roughly half of what we experienced last year. As inventory continues to steadily decrease, we’ll likely see even higher buyer competition well into the year. This may also lead to sellers continuing to receive over 100% of the asking price as we move into the Spring and Summer months.
A direct link to our 2021 Annual Review can be found here.Posted by Sarah Hughes on