The 2021 housing market has been a monster for homeowners, sellers, and buyers alike. Issues spiked by complications and uncertainty thanks to the COVID-19 pandemic have only heightened the intensity of the market’s volatility. Areas in the California Central Valley, including Merced, have been experiencing the winter season’s fluctuations, but largely have been following national trends in housing prices and demand. Expert opinions have forecast the 2022 housing market to experience an overall slowing and a slight trend toward stability. These predictions come largely from the market’s anticipated reactions to this year’s rapid changes and overall market instability. The new generation of millennial homebuyers continues to enter the market, increasing an already massive demand for homes that the market simply can’t keep up with. The supply of available homes, both new builds and resales, is quickly devoured by the insatiable demand of homebuyers. All of this is occurring while many have lost their homes due to lost wages or other financial crises stemming from the pandemic and the previous lockdowns. Below is a full analysis of the implications and effective changes you can expect to see in California’s 2022 housing market.
For current homeowners, the low mortgage rates the year began with will likely soon rise. Due in part to the economic strains brought on from the pandemic, the federal reserve has planned policy changes in an attempt to curb the growing inflation during the new year. They plan to end their mortgage-backed security investments by spring of 2022, which will likely lead to increased rates for current homeowners coming into the 2022 market. Mortgage rates are predicted to increase to the high-3% or low-4% range for 30-year fixed rates by the end of 2022.1 For prospective homeowners, the future will likely see a continued increase in average prices for homes. Due to the increased demand from new homeowners entering a market already starved for available real estate, prices show no signs of dropping in 2022. Most predictions do, however, indicate this increase to slow and lose its current volatility in the new year. This is largely driven by a growing buyer reluctance as the prices have only moved further out of reach for millennials entering the market. This may also lead to a decrease in sales, but the demand will likely still remain steady thanks to multiple market factors driving homeowners. This demand is especially prevalent in the Central Valley area in part due to the historical demand for property as well as the continual influx of new generation homeowners. Seasonal changes have historically affected the Merced area, and the 2021 fall and winter seasons have been no different. This, however, should be underlined by the strong factors pushing the seller’s market well into 2022. The near-record-low construction and production of new homes in the Central Valley area (largely due to the pandemic) will likely push the seller’s market well into the spring seasons, continuing to fortify home prices despite any slowing of sales in the California market.
Overall the prospects for the 2022 housing market seem hopeful, leaning toward a more stable, if not inexpensive, market. Homeowners should note these predictions if they are considering selling, as any new purchases will likely be much more expensive coming into the new seasons. The Central Valley housing market is holding strong, and it appears this will continue into the foreseeable future. If you want to learn more about the Central Valley housing market or real estate trends in the Merced area, please reach out to Soldavi Realty. We continue to work toward helping our Merced and Central Valley neighbors build the futures they imagine by helping to make their real estate dreams a reality.
1“What will drive mortgage rates higher in 2022?” Aly J. Yale, The Mortgage Reports,
December 20, 2021.
Sources:
https://themortgagereports.com/87351/whats-driving-higher-mortgage-rates-2022
https://managecasa.com/articles/california-housing-market-report/
https://sjvsun.com/business/real-estate/valleys-housing-market-starts-to-cool-but-home-prices-remain-up-post-pandemic/