West Michigan real estate off to good start in 2022

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As we closed out 2021, the residential market was marked by healthy price gains for owners and sellers, historically low interest rates for buyers and a continued sentiment of “appreciation for home.”

These factors continued to drive interest and capital into residential real estate. The 14-18% increase in average sale price last year in most market areas was just one of the results from these factors.

It’s early in the year, but so far that trend seems to be continuing in 2022. Even in the face of rising interest rates (up roughly half a percent since the beginning of January), buyer activity and demand continue to be very active. Last year’s patterns of multiple offers on new listings, appraisal guarantees and homes selling for well over list price have carried over into the new year.

Will this trend continue into the rest of 2022? There are many factors that will play into the market’s performance again this year. Here are a few to watch:

Interest rates

All indicators point to rates going up this year. The extent to which they do rise will dictate how much of an effect on market demand we’ll see. A slight rise could accelerate a sense of urgency for buyers. A more significant rise could have a dampening effect. In any case, we anticipate rates will remain in the historically low range.

Affordability 

House prices, interest rates and household incomes all come into play on affordability. Through most of last year, rising home prices were buffered by favorable interest rates and, in many cases, increased disposable income through stimulus. The extent to which rates increase, the extent to which wages and incomes increase for buyers, and the pace of home price increases will all be pieces of the affordability puzzle. 

Economic confidence

Especially in the past couple of years, the housing market has been robust and has thrived in a virtuous cycle of optimism. A rising stock market, available employment and an improving economy have given buyers of all types the confidence to take the step of home ownership. Layered on top of that, we are in the relatively early stages of a wave of second home ownership. Buyers are buying second homes for a place of retreat. Second homes are being bought and used as short term rentals to generate income. And investors increasingly are looking to real estate for long term residential rental properties. These all are nudging prices higher and driving the market further.

Undoubtedly, it again will be an interesting year in real estate in 2022. With today’s continued low inventory of listed properties and the lingering effect of government stimulus working its way through the economy, we expect to see the real estate market make gains again this year. For those with changing real estate needs, it continues to be a good time to be in the market.

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