The housing market has been a hot topic in recent years, with skyrocketing prices and a shortage of inventory making it difficult for many buyers to find their dream home. As we look ahead to the next five years, there are a few key trends that are likely to shape the housing market and impact buyers and sellers alike.
Interest rates will rise, but remain relatively low
One of the biggest factors influencing the housing market is interest rates. Historically low interest rates have helped fuel the recent boom in the housing market, with many buyers taking advantage of low mortgage rates to purchase their dream home. However, experts predict that interest rates will gradually rise over the next five years, albeit remaining relatively low by historical standards.
According to a report by Freddie Mac, the average 30-year fixed mortgage rate is expected to rise to 3.7% by the end of 2022 and 3.8% by the end of 2023. While this is still relatively low compared to historical rates, it may make it more difficult for some buyers to afford a home, particularly in high-priced markets.
Home prices will continue to rise, but at a slower pace
Home prices have been on a steady upward trajectory in recent years, with many markets experiencing double-digit annual price increases. However, experts predict that the pace of price appreciation will slow over the next five years, as inventory gradually increases and interest rates rise.
According to a report by CoreLogic, home prices are expected to increase by 5.2% in 2022 and 3.2% in 2023, compared to a 15.6% increase in 2021. While this may come as a relief to buyers who have been priced out of the market, it may also make it more difficult for sellers to command top dollar for their home.
The housing supply will remain tight
One of the biggest challenges facing the housing market in recent years has been a shortage of inventory. This has made it difficult for buyers to find homes that meet their needs and has contributed to rising home prices. Unfortunately, experts predict that the housing supply will remain tight over the next five years, due in part to a lack of new construction and an aging housing stock.
According to a report by the National Association of Realtors (NAR), new home construction is not keeping pace with demand, with only 1.6 million new homes built in 2021 compared to an estimated demand of 1.9 million. This means that the housing supply will continue to be tight, particularly in high-demand markets where affordability is already a challenge.
Urban centers may see a resurgence in demand
The COVID-19 pandemic had a significant impact on the housing market, as many buyers sought out larger homes with more space to accommodate remote work and distance learning. This led to a surge in demand for suburban and rural properties, as buyers looked to escape crowded urban centers.
However, as the pandemic subsides and remote work becomes more common, experts predict that urban centers may see a resurgence in demand. This is because many buyers may be looking to move back to cities for the convenience and amenities they offer, without the need to commute to a physical office every day.
Technology will continue to play a role in the buying and selling process
Finally, technology is likely to continue to play a significant role in the home buying and selling process over the next five years. From virtual home tours to online mortgage applications, technology has already revolutionized the way that buyers and sellers approach real estate transactions.
As technology continues to evolve, we can expect to see even more innovations in the housing market, such as artificial intelligence-driven home valuations and blockchain-powered property transactions.
