The housing market is very complex and shares close ties with the U.S. economy. Even the slightest shift can have implications for home buyers and Real Estate agents.

Read more to learn what experts are saying about the housing market in the new year.

Housing market now

Coinciding with the pandemic in 2020, supply chain shortages and lack of new builds made it difficult for buyers to find new homes in 2021.

COVID-19 has played a major role in impact spending and production. At the start of the pandemic, building materials were bought up early as homeowners were eager to start home renovations.

Meanwhile, new products could not reach stores. Either because they weren’t being produced or because of backups in the supply chain.

This low supply and high demand created a strong seller’s market, which led to higher home prices. And even though houses cost more, bidding wars became normal.

With this high competition, homes were selling in a matter of days or even hours. This gave sellers the upper hand.

However, buyers continue to engage with the market since lower mortgage rates and remote work made homeownership a possibility.

The future of supply and demand

Experts agree that the housing market will continue to favor sellers. They expect the demand for homes to outpace the supply for some time.

Changes in economic conditions are already affecting buyers. For example, lumber prices went up as demand for building material outpaced supply.

However, according to Kuba Jewgieniew, CEO of Royalty ONE Group, lumber prices are expected to stabilize over the next year which will make building new homes affordable for many people.

This relationship between supply and demand will continue to be the main predictor of how things will turn out.

However, as income increases and employment rates move back to normal levels, the market should begin to balance out.


Interest rates & consumer confidence

Another factor predicted to change the market is the adjustment of interest rates by the Federal Reserve.

The housing market is sustained through a system of loans and interest rates, flowing down from the federal level.

When inflation is high, the Federal Reserve raises interest rates, which affects home loans.

Higher mortgage rates mean buyers will have to pay more for homes. This could discourage buyers and slow things down.

Another factor that affects the market is consumer confidence. When people are optimistic about the future, they tend to invest in long-term goals, like houses.

According to Kuba Jewgieniew, consumer confidence and investments are growing as the pandemic era evolves.

The housing market in 2022

The housing market has been ever-changing over the last two years. The pandemic highlighted how all changes influence the opportunities available to home buyers and investors.

However, the market’s relationship with the economy offers hope for 2022. Supply and demand should balance out over time.

This balance will eventually turn to favor buyers again in the future. In the meantime, sellers can make the most of this time in history.