Economists looking to 2022 say real estate markets are struggling to find a new balance between the interests of buyers and sellers. It’s unclear if next year’s sellers will retain the overwhelming dominance they’ve enjoyed since the onset of the pandemic sparked a surge in buyer demand.
At the home listing company Realtor.com, economic research manager George Ratiu says a recent increase in listings is providing a measure of hope for beleaguered buyers aiming to finally make a purchase next year.
“The bump in new listings is a welcome development in a market still searching for more balance, and it helps to keep price growth in check,” Ratiu says.
This has been a banner year for real estate sales, due in large part to intensified demand for more spacious properties among renters and trade-up buyers. But economists say a portion of that COVID-era demand has already been spent and won’t carry over into 2022.
“The housing sector’s success will continue. But I don’t expect next year’s performance to exceed this year’s,” says Lawrence Yun, chief economist for the National Association of Realtors (nar.realtor).
One unknown is how remote work opportunities will play out in the future.
“We are only in the first innings of work-from-home options. People have not fully digested the work-from-home flexibility model yet in determining home size and locational choice,” Yun says.
Another factor that could inhibit buyer demand somewhat in 2022 is the expectation that mortgage rates could rise, which could slightly reduce the buying power of income-constrained purchasers.
“With every little pickup in rates, there are fewer people who can afford to buy,” says Kaki Lybbert, a Century 21 real estate broker and NAR vice president-elect.
She cautions those planning to sell a property in 2022 to avoid hubris.
“You should be confident but not arrogant, which is never a good idea. As a seller, you’ll still be in that catbird seat. You’ll probably get multiple offers, but fewer of them than you would have received this year,” Lybbert says.
Here are a few pointers for those determined to sell next year:
-- Avoid the mistake of overpricing.
Lybbert tells the true story of one couple who insisted on listing their 3,500-square-foot property for $100,000 above its fair market value. Because of the property's location in a hot neighborhood, the owners hoped their over-market pricing plan would yield them more at the closing table. It hasn't worked out.
“That place has been on the market for 125 days, and it has yet to sell,” Lybbert says.
She says owners planning to sell next year can reasonably anticipate receiving offers at list price or above. But setting an over-market list price can backfire.
“When it comes to home values, buyers aren’t stupid,” Lybbert says.
-- Rule out financially unqualified would-be purchasers.
Sharp sellers are careful to check the financial standing of would-be purchasers.
“Who wants a deal to fall through because the buyers lack the wherewithal or credit to get it to the finish line? That’s folly,” says Eric Tyson, a personal finance expert and co-author of “House Selling for Dummies.”
Before accepting an offer, sellers should insist on seeing a genuine preapproval letter from a known lender, Tyson says. This should establish that the prospective buyers have had their credit checked, their employment confirmed and their assets verified.
In addition, prospects can be asked to supply other details about their creditworthiness, such as their credit scores. The most common of these, known as FICO scores, range from 300 to 850. The higher that number, the more likely are borrowers to get the loan they need to close the deal.
“To avoid sleepless nights, look for buyers with FICO scores of 700 or above,” Tyson says.
Bidders can obtain reports on their credit scores from the Fair Isaac Corp (myfico.com).
-- Foresee issues that could emerge during an inspection of your home.
For many months, buyers in competitive markets have been willing to waive their right to a pre-closing home inspection. But as conditions normalize in 2022, more purchasers will likely exercise their right to a home inspection.
Owners should never try to talk buyers out of a home inspection. But smart sellers may wish to consider paying for their own inspection even before the property goes on the market.
“Knowing the problems that lurk in your house is especially important if the place is more than 10 years old,” Tyson says.
-- Attempt to avoid troublesome buyers.
Not all home sellers can be choosy about the offer they select. But if you’re reasonably certain you’ll have more than one bid from which to pick, Tyson says you should seek to avoid cutting a deal with difficult people.
You may not have any direct dealings with your prospective bidders. But your listing agent or others might observe them when they visit your place. And their behavior can be very telling.
One telltale sign of difficult people is that they often make negative remarks when visiting a property. Though you’re likely to not be present for showings, your listing agent should learn of these unpleasant comments and pass them on to you.
By avoiding such prospects, you could spare yourself a lot of grief.
“If you’re lucky enough to get multiple bids, you can be pickier about the buyers you choose. If possible, resist troublesome folks who might nickel-and-dime you all the way to closing,” Tyson says.
(To contact Ellen James Martin, email her at email@example.com.)