2021 is finally behind us, and what a year it was. We saw home prices spike to amazing heights as a result of historically low interest rates and a frenzy of buyers entering the market. But as inventory continues to dwindle in most areas, will 2022 continue those trends?
Many experts are saying 2022 will be just as unpredictable as 2021 on a national scale – let’s take a look at the factors. A major influence on activity will be mortgage rates. Lawrence Yun, Chief Economist for the National Association of Realtors, says rates will likely climb to 3.7% by the end of 2022. While that’s still historically low, it will make a difference for some buyers as home prices are also predicted to rise. Why will prices likely rise? Buyer demand is going nowhere, especially in hot markets like Colorado. Combine that with persistently low inventory and lack of new construction, and there’s a chance we may see homes selling for way over asking, similar to what we saw this past spring and summer.
Between March and July last year, most areas in the Denver Metro saw incredible surges in the number of homes selling over list price, anywhere from 4% to almost 7% over asking price on average. The same goes for areas in Northern Colorado as well as Colorado Springs. This followed a very low inventory dip that occurred from December 2020 - April 2021. Then as inventory ticked up to the end of the year, we saw the percentage of closed to list price level-out.
That same pattern may be repeating this year. As of last month, the month’s supply of inventory (how long in months it would take for all current inventory to sell at the current pace of the market) dipped lower than ever before, and has been steadily decreasing since September. Again, demand is going nowhere, and with a lagging supply of new builds coming into the market, 2022 could turn out very similar to 2021.
