Five Reasons We Won’t See A Housing Crash in 2022

It may be hard to believe, but the South Florida real estate market is quickly approaching the conclusion of its second full calendar year of record-shattering pace. Homes and condos are still selling nearly as quickly as they were at the start of the COVID-19 pandemic, and setting new highs along the way. 

With respect to Mr. Gordon Gekko, many real estate experts and economists—not to mention home buyers and sellers—aren’t convinced that all this greed is good. Headlines abound regarding a potential housing crash which would rival that of the late ‘00s. While it’s true that some cherry-picked data trends could cause concern, the fact of the matter is we find ourselves in a far different climate; one that could actually turn out positively for both sellers and buyers alike.

Here are five reason why we believe 2022 will be another strong year for real estate:

1. Help May Soon Arrive For First-Time Buyers

Potential first-time South Florida homeowners have found no shortage of frustration over the past two years. They’re losing out to better-funded, older, and more experienced buyers originating from out of state as well as their own backyard.

Financially secure and straight cash buyers can manage sizable down payments, ever-rising prices, and bidding wars—but those on lower incomes and limited by loan qualifications have consistently been left in the dust.

While help likely won’t arrive in the form of even lower interest rates, there is proposed legislation which could help shore up down payments. Congress is now reviewing proposals (https://www.politico.com/news/2021/10/07/housing-aid-cuts-battle-515588) which include a government-subsidized $20,000 down payment assistance program for first-timers, as well as bonuses for minority and low income buyers. It remains to be seen whether anything like this is passed, but the fact that these struggles are on Washington’s radar is a positive sign.

2. The Inventory Tide Is Set To Rise

The mortgage forbearance programs enacted at the start of the pandemic are gradually expiring across the country. Unfortunately, there are many homeowners who will not be able to keep their homes as a result. The silver lining this time around however, is that rather than fall into foreclosure, they will have the option of selling their homes.

This will result in an influx of fresh, new inventory sometime early next year.

Of course, other circumstances may also contribute to the expected rise in available homes. Many may find themselves needing to sell in the wake of a loved one passing—whether naturally or as a result of COVID-19.

A byproduct of more inventory is naturally a cooling off of prices. We still expect a rise next year—but one not nearly as drastic as what we have witnessed over the 24 months prior.

3. Mortgage Rates Will Remain Near Historic Lows

It’s true—mortgage rates have risen relatively significantly compared to what many took advantage of in 2020; however, they were so low during that time that even an expected increase to more than 3.5% in 2022 still makes mortgages ridiculously affordable compared to a half decade ago.

This means borrowers will still be able to apply plenty of leverage while maintaining affordable monthly payments to match the expected rising prices of homes.

4. A Housing Crash Isn’t Lurking Around The Corner

Yes, prices have skyrocketed over the past couple of years in relation to what many are used to; and yes, the last time we witnessed anything close to this was during the lead up to the Great Recession. The fundamentals driving these prices though are completely different. Rather than subprime lending practices, the buyers qualifying for—and justifying—higher home prices are far more solid. In addition to this, demand has not let up.

Those who want to buy are ready and able, as opposed to stretching their price-to-income ratio to its breaking point. There’s no hint of an oversupply of overpriced housing either.

It all adds up to a solid foundation of qualified buyers, which means we’re climbing more toward a plateau than sitting a bubble about to burst.

5. Inflation Won’t Cut Into Home Values

Outside of the increase in home prices, consumers of all kinds have been noting the rising costs of goods and services as a product of inflation.

Potential buyers will be faced with reassessing budgets, and builders are contending with higher costs of raw materials and appliances.

Even the cost of mobile homes has jumped significantly.

So, should buyers stay on the sidelines in the fear that any of their hard-earned equity will evaporate in the wake of the decreasing dollar? If history is a reliable example—and it has proven to be in this instance—the answer is no.

A perfect example can be found approximately 50 years ago. Inflation rose as high as 7.1% at one point in the 1970s. However, during the same period, home prices rose by 9.9% year over year, handily beating inflation.

Clearly, those looking for a strong hedge should continue forward with any home purchasing plans they have.