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Navigating the 2022 Housing Market as a First-time Home Buyer

By Ralph DiBugnara, President and Founder of Home Qualified, a web series and digital resource for homeowners, buyers and sellers that addresses contemporary trends within the current real estate landscape.

The real estate landscape is facing conditions that are making first-time home buyers, especially those that are currently renting, question whether or not it is the right time to buy a home. With interest rates increasing this year, in addition to inflation and mortgage rate concerns, most would think that it is not an ideal time to buy a home. Although these concerns are valid, the truth is that it remains a good time to buy a home and save on housing costs in the long term.

As inflation continues to rise, people are not only faced with soaring rents, but also higher costs of living overall. While home ownership may feel prohibitive, it is more in reach than people realize, and further, can end up making better economic sense in the long term. For example, buying a home now, and locking in mortgage payments, will allow people to have a more stable housing cost on a tangible investment instead of making rent payments that they do not have any control over. Rent payments are not fixed and will continue to increase year after year. To be prepared to enter the 2022 real estate market wisely, buyers should consider the different factors at play.

Rising Rents, Interest Rates, Home Shortages

Increasing rents and inflation have displaced many tenants from their homes and tenants are seeing a direct impact on housing costs when they are not fixed with a mortgage payment. Increasing rents will be the norm for the foreseeable future. However, 2022 will still be a very active year in the housing market. Having witnessed the ebb and flow of the market for over 20 years, I do believe that rising interest rates will impact buyers, but not enough to make it a bad investment and deter them from purchasing a home this year.

Rents rose five times as fast in 2021 compared to 2020. According to a report by Realtor.com, rents nationally rose an average of 10% in 2021, largely caused by two factors: inflation and home inventory. We are also experiencing a shortage of homes for sale, which is having a drastic effect on those searching for a home. According to a study done by Altos Research, the number of homes available for sale nationally sits at 271,913 – 500,000 short of a healthy market. This shortage will take a couple of years to correct. This period of buying should also be called The Big Compromise. This compromise will include where exactly buyers can afford to live, what condition the house is in and how much they are willing to sacrifice from their lifestyle to afford the property. The good news is that because of the new reality of work from home and virtual learning we all have many more options of the places we can call home. Buyers should use that to their advantage when searching for their home and be flexible.

Lock in a Mortgage Payment to Avoid Unpredictable Costs

The best way to combat rising rents and additional costs is for home buyers to fix their monthly housing payment by buying a property and locking in a mortgage payment. That payment over the next 5-10 years, even if it is currently higher than their rent, could represent huge savings in the long run as rent costs continue to rise. When qualifying for a mortgage, the lender does not take into account all of a buyer’s expenses. Just the ones that appear on a credit report. That does not include utilities, cell phone bills, cable, streaming services, car insurance, nor health insurance. Home buyers need to know what they are comfortable spending, not what they are being told by a lender that they qualify for.

What First-time Home Buyers Should Keep in Mind During this Time

Buyers should take certain measures to ensure they are making a wise long-term investment and can afford the home they are committing to. The best way for buyers to navigate the process this year is to first set a budget that they stick to, and secondly, be patient in the buying process. Home buyers will still need to compromise. A budget is very important because as costs and prices continue to rise, they have to know what they can afford and have a plan. Additionally, when navigating the home search, it is important that home buyers do their research and compare pricing by not only looking at other homes that sold over the last 30 days – instead of the traditional six months – but also at what else is currently listed on the market and what is coming soon.

The benefits of home buying at this time far outweigh the concerns. It might seem counterintuitive to buy a home during a time of higher interest rates and inflation, but over time the numbers will show that home buyers are buying at a time of value that will save them money and earn equity in the long term on their own property.

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