Buying a Home in 2022? It Won’t Be Fun or Easy. Here Are 11 Tips to Help Make It Happen!

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If you’ve yet to enter the housing market, but are thinking of buying a home in 2022, there’s a lot you need to know. The 2022 housing market won’t be for the faint of heart!

As I once pointed out, this isn’t your older sibling’s housing market. Not just anyone can get a mortgage these days. You actually have to qualify. But we’ll get to that in a minute.

Let’s start by talking about home prices, which have surged in recent years and are now well above their previous all-time highs.

The good news is mortgage rates remain very low, and while they probably won’t break new records this year, they’ll certainly help keep affordability within reach.

At the same time, you can expect plenty of healthy (or let’s be honest, unhealthy) competition from other buyers, making it increasingly difficult to land your dream home.

1. Prepare for Even More Sticker Shock When Buying a Home in 2022

Yes, if you’re prepping to buy a home in 2022, expect to be shocked, and not in a good way. At this point in the cycle, home prices have eclipsed old all-time highs in many parts of the country, if not nearly all places.

And even if they haven’t yet, there’s a good chance you’ll be paying more than the Zestimate or Redfin Estimate for the property in question due to limited inventory and strong home buyer demand.

Before this crazy seller’s market got underway, you could often expect to pay below the Zestimate/Redfin Estimate. Real estate agents even used to hide them!

Nowadays, these automated valuations seem to get updated higher day after day, week after week.

The bad news for renters is home prices are expected to rise another 16% in 2022, so things are just getting more and more expensive.

In short, expect to shell out a lot of dough if you want a home next year, and that could mean paying well over asking price, even if the original list price seems high.

Also, the fear of higher mortgage rates could make things even more intense between you and other prospective buyers.

But if you absolutely love it, it might be a small price to pay to finally put a frustrating home search to rest.

2. Get Pre-Approved for a Home Loan Early On

Speaking of that home being out of your price range, you may want to get pre-approved with a bank, mortgage broker, or mortgage lender ASAP.

First off, real estate agents won’t give you the time of day without one, especially in a red-hot market.

And secondly, if you don’t know how much house you can afford, you’re basically wasting your time by perusing listings and going to open houses.

This is especially true if the homes you’ve got your eye on are consistently going above asking since you’ll need even more purchasing power when push comes to shove.

It’s not hard or all that time consuming to get a mortgage pre-approval, and it’ll give you more confidence and perhaps make you more serious about finally making the move.

Tip: Look for an online mortgage lender that lets you generate a pre-approval on the fly in minutes (and know you don’t have to use them if and when you proceed with a purchase!).

3. Check Your Credit Scores and Put Away Your Credit Cards

While you’re at it, you should check your credit scores (all 3 of them) and determine if anything needs to be addressed. NOW!

As I always say, credit scoring changes can take time, so give yourself plenty of it. Don’t wait until the last minute to fix any errors or issues.

And while you’re addressing anything that needs more attention, do yourself a favor and put the credit cards in the freezer (or somewhere else out of reach).

Chances are you’ve racked up the spending during the holidays, so it’s time to start paying it off.

Lots of spending, even if you pay it back right away, can ding your scores, even if just momentarily.

It can also increase your DTI ratio and limit your purchasing power if you don’t pay it off. Ultimately, bad timing can create big headaches.

Additionally, pumping the brakes on spending might give you a nice buffer for closing costs, down payment funds, moving costs, and renovation expenses once you do buy.

Speaking of assets, stop messing with them and keep them in one account that can be easily verified once you apply for a home loan.

This means no incoming or outgoing transfers other than direct deposits from your job. A cleaner bank statement will make life easier for everyone, including your underwriter!

4. Housing Inventory Will Be…Super, Duper Limited

It’s the same story in 2022 as it was in 2021, 2020, 2019, and heck, even as far back as 2012. Just worse.

There’s really been a lack of inventory since the housing market bottomed because homes were never for sale en masse.

During the prior housing crisis, borrowers got foreclosed on or deployed real estate short sales to move on, and banks made sure all that inventory never flooded the market.

But many rode it out and are now in incredible positions with tons of home equity just ripe for the tapping.

Today, we’ve got millions of would-be sellers with nowhere to go, thanks to the massive price increases realized in the past few years.

Ultimately, it’s hard to move up or downsize, so a lot of folks are staying put. That means less choice for you.

While we saw an uptick in inventory in 2019, it appeared to be short-lived and now housing supply is at an all-time low!

At the end of November, the National Association of Realtors said unsold inventory was at a 2.1-month supply at the current sales pace, a decline from both October and a year ago.

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Throw in supply-chain issues, sky-high lumber prices, and a lack of skilled labor, and you’ve also got very few new homes being built.

With near-record low interest rates and lots of Americans hitting the ripe first-time buyer age of 34, expect competition to intensify.

Again, this supports the argument of being prepared early so you’re ready to make an offer at a moment’s notice!

5. The Home You Buy Might Be a Fixer Upper

You probably don’t have the same skill set as Joanna and Chip Gaines, but you might still wind up with a fixer-upper thanks to those massive inventory constraints. And that’s totally okay.

What I’ve learned from buying real estate is that you’ll typically never be content with the upgrades previous owners or developers make, even if they were super expensive and high quality. So why pay extra for it?

There’s a good chance you’ll want to make the home yours, with special touches and changes that distance yourself from the previous owner.

Don’t be afraid to go down that road, but also know the difference between superficial blemishes and design challenges, and even worse, major problems.

Especially this year, watch out for money pits that sellers can finally unload because real estate is just so very hot.

Those properties that could never sell may finally find a buyer, and you might not want that buyer to be you.

Still take the time to get a proper home inspection and go to the inspection yourself!

6. You’ll Probably Have to Fight for It Too

What’s even more annoying is that you may have to fight to get your hands on the few properties that are out there, depending on the housing market in question.

I was speaking with my endodontist (yes, endodontist) the other day and he brought up a good point.

Having had purchased a property a year or so ago, he mentioned how today’s home buyers are increasingly desperate.

So if and when they do come across something they even remotely like, they’re willing to go above and beyond.

And that means an offer much higher than list, scaring off other would-be buyers in the process.

Sprinkle in the threat of higher mortgage rates and things could be even more competitive in 2022 versus 2021.

If the property is popular, there will always be someone willing to outbid you for that home they just must have. This is another reason why the fixer can be a winner, the hidden gem if you will.

That being said, it’s okay to pay more than asking (or even the fully appraised value), just keep in mind that there are plenty of fish in the sea.

Well, perhaps not plenty right now, but there’s always another opportunity around the corner.

Stay poised and don’t let your emotions get the best of you. Like anything else, it’s okay to walk away. Trust your gut.

7. Still Negotiate with the Home Seller

Just because 2022 will be a seller’s market yet again, at least in popular markets, doesn’t mean you can’t negotiate. You can still get into a bidding war, win the thing, and then inspect the heck out of the house.

Inspections are key to determining what will need to be addressed once the home changes hands, and what the seller will need to do to compensate you for those issues.

Sure, the seller may say it’s being sold as-is, but you can still say what about this, that, and that other thing?

If you don’t get a quality inspection (or two), you will have a difficult time asking for credits for closing costs or even a lower purchase price. Take it very seriously, the return on investment can be staggering.

Also know that in some markets, buyers may have the upper hand in 2022. Not all real estate markets are red-hot anymore, so you might be able to bid below asking and still get money for repairs.

Take a moment to better understand your target market by looking at recently closed listings on websites like Redfin and Zillow. Check what they originally listed for and eventually sold for.

If they’re consistently selling above list, you know it’s going to be a tough buy. If not, well, get your negotiating hat on.

Some hot 2022 housing markets include Boise, Columbus, Indianapolis, Salt Lake City, and Spokane.

8. Always Do Your Mortgage Homework

While you might have your hands full with an overzealous real estate agent, it’s important not to neglect your home loan.

Mortgages are often just mailed in, with little attention given to where they are originated, or what price is paid.

Your real estate agent will have their preferred lender that you “really should consider using because they’re the best,” but you don’t have to use them or even speak to them.

I’ll typically say get a quote from them as a courtesy to keep things amicable, and to appease your agent, but also shop around with other banks, credit unions, lenders, and mortgage brokers.

At the same time, think about how you want to structure the mortgage, including down payment, loan type (FHA or conventional), and loan program.

The 30-year fixed isn’t always a no-brainer, though right now it’s a tough argument to go against it with inflation looking scary.

There are other loan programs that can make sense too, such as the 5/1 ARM, which often get swept under the rug. Make the choice yourself.

9. Expect a Very Good Mortgage Rate

If you’ve done your homework and are in good financial shape, you should be able to get your hands on a very low mortgage rate in 2022.

In fact, mortgage interest rates are historically amazing at the moment, despite not being at their all-time lows anymore.

Sure, your rate may start with ‘3’ instead of ‘2’ but that might be negligible. And a 3% 30-year fixed is still an awesome deal, especially if inflation does worsen and interest rates shoot up.

Once again, the 2022 mortgage rate forecast looks mostly favorable, so they may stay put for awhile longer or even dip here and there depending on COVID.

In terms of financing, it’s still a great time to buy a home. Consider that the silver lining to an otherwise pricey and competitive housing market.

Of course, with home prices creeping higher and higher, even a low interest rate may not be enough to offset that growing monthly payment.

So always make time to shop to ensure you get the best rate and the lowest fees, even if financing is on sale.

Just because rates are cheap doesn’t mean you should just accept what’s thrown in front of you. Still complain, still negotiate, still ask for more!

10. The Best Time to Buy Might Be Later in the Year

Before you get too excited, or worried that time is running out, it might actually be in your favor to slow play this one.

Per Zillow, the best time to buy a home may be in late summer, including the months of August and September.

Basically, you’ve got the slow, cold months at the start of the year where there isn’t much inventory, followed by the strong spring housing market where everyone and their mother wants to buy.

This is typically where asking prices peak and also when mortgage rates are highest.

Then you get a lull and perhaps even a dip in home prices during summer, which could be an attractive entry point.

You might even get lucky and snag a price cut with a lot less competition while other prospective buyers are on vacation.

The caveat is that mortgage rates are expected to rise in the second half of the year, so that could dampen your win.

Regardless, get pre-approved NOW and set up your alerts for new listings ASAP and just be ready to pounce whenever. Don’t attempt to time this market!

11. Are You Actually Sure You Want to Buy a Home?

Lastly, take a moment to ensure you actually want to buy a home as opposed to continuing to rent.

I constantly hear the old “throwing away money on rent” line and it never gets old. Then I proceed to fantasize about renting with not a care in the world.

Are you sure you’re throwing away money on rent? Renting can be pretty awesome.

You don’t pay property taxes, homeowners insurance, HOA dues, PMI, or mortgage interest. And you can leave whenever you want. That sounds like a sweet deal too.

Oh, and if anything goes wrong, you can just call your landlord or property management company. Easy peasy.

With a home, the problem is yours, and yours alone to deal with. Broken water heater? You’re paying thousands out of pocket, not the landlord.

And with home prices so high, be careful not to become house poor in exchange for entering the housing market. Make sure you’ve got reserves on hand if and when stuff goes wrong.

Consider the Effects of COVID-19 in 2022

One extra thing to consider given the ongoing COVID-19 pandemic that reared its head a couple years ago. Yes, it’s COVID-19, and it’s 2022…

As you might expect, it’s making the home buying and selling process a bit more complicated than usual, despite companies learning to adapt.

For example, home sellers are more reluctant to hold open houses or let anyone in their home, and prospective buyers are probably also a bit apprehensive entering a stranger’s house.

But it’s still very important to get a good look at a property you’re considering buying. The same goes for the home inspection and the home appraisal.

Both should still be taken very seriously, even if more difficult to complete. Ultimately, you should always give a home purchase a ton of thought, so for me not much has changed.

It doesn’t necessarily have to be put on hold due to COVID, but it might require more thought given the increased uncertainty with the economy, demographic shifts (city vs. suburban living), and so on.

Also, think before you make a complete lifestyle change like moving out of the city and into the country, just because it’s on-trend. You might look back in a year or two and say what was I thinking?! Ever seen Funny Farm?

I believe 2022 will usher in a return to urban living in many parts of the country. This means the condo market will heat up after a slow year or two.

In other words, it’s going to be tough to buy anything in 2022, not just a single-family home in the burbs.

If you’re wondering if 2022 will be a good year to buy a house, that’s another question. I expect prices to continue to rise for the next couple years, but the party could be nearing an end.

Read more: When to look for a house to buy.

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