In a lot of ways, 2021 was a complete whirlwind of surprises – including within the housing market. An unanticipated shortage of homes for sale, coupled with record-low interest rates and an active population of would-be homebuyers, sent the housing market soaring.
A lot of people who had been thinking about buying new homes in 2021 decided to abandon their search for the right property for a while, particularly as fall turned into winter. If you were among that crowd, here’s why you should renew your resolve and make 2022 the year you ditch the rental and buy a home, instead.
Think Rental Rates Are High Now? They’re Probably Going to Go Higher in 2022
Rental rates spiked dramatically in 2021. For example, the median price for a one-bedroom rental only increased a mere 0.3% in 2019 and only 0.6% in 2020. In 2021, however, the rent on even that kind of modest dwelling shot up an incredible 12.1%.
The experts say that we can expect to see more of the same in 2022, for several different reasons:
1. Eviction Moratoriums Are Ending
Eviction moratoriums over the last two years have left some landlords feeling a financial pinch – and they want to recover their losses. Now that they’re free (in most areas) to evict non-paying tenants, landlords are raising the rents accordingly.
2. Landlords Know They Can Exploit the Hot Housing Market
There’s a little bit of a “gotcha” factor playing into the rental game right now. Landlords know that housing prices have been soaring. Those with properties in highly desired areas (due to their convenient locations or amenities) may be willing to gamble that they can get away with raising the rent simply because people can’t find a suitable house nearby.
3. Private Landlords Have Mostly Disappeared
A lot of the smaller landlords or “mom-and-pop” rentals – which typically have lower rents and are easier to negotiate with – are gone for good. Private owners with only a few rentals largely found the pandemic rules difficult to manage. Many sold their investments to larger property management or investment firms (who could better afford to cope with unpaid rentals and eviction moratoriums). Many of these companies are unflinching when it comes to charging as much as they can get.
4. Rentals That Were Sitting Empty a Year Ago Are Now in Demand
The rental market responds to the laws of supply and demand, just like every other industry. Landlords in some areas saw a mass exodus of tenants early in the COVID-19 pandemic as people fled urban areas for the suburbs. Now, people are moving back into the cities – and that means nice apartments (and even not-so-nice apartments) in prime areas are in demand.
For the would-be homebuyer, this is all bad news. It translates to higher rental prices that can make it difficult for tenants to save up for a downpayment on a home of their own.
What If You Already Have the Money Saved for a Downpayment?
Maybe you’ve been saving for a while now, knowing that you wanted to buy your own place. Maybe you’re lucky enough to have a relative who is willing to give you the money for the downpayment on a home of your own. Maybe you had a big windfall. Whatever the situation, you’re in the perfect position to get out from under your landlord’s thumb and get your own home – and you shouldn’t wait.
Regardless of how the market behaves in the short term, buying a house is somewhat like planting a tree: The best time to do it is always 20 years ago, but you can only act today. Here’s why you should take the plunge:
1. Home Prices Will Likely Stabilize
No crystal ball that can tell for sure, but you may see more homes on the market in 2022 than you did in 2021 – but that doesn’t necessarily translate into lower home prices. Increased tariffs on wood and the fact that building supplies are hard to find right now will likely keep new construction to a minimum, which means the majority of the homes on the market will be pre-owned.
What you may see, however, as more folks in the Baby Boomer generation go forward with their plans to downsize, is a market that stabilizes. That may put an end to the crazy bidding wars for available homes that dominated 2021 by maintaining a market that’s tight but balanced.
2. The Disadvantages of Renting Outweigh the Cost of Buying
Finally, there are huge benefits to owning your own home that you can’t get while you’re renting. These include:
- The record-low interest rates won’t last forever. Mortgage rates increased a little toward the end of 2021, but they’re still remarkably low. If you wait until the interest rates go back up, you’ll end up spending thousands more over the life of your loan for your home.
- You’ll stop wasting money on rent. It’s not unusual (particularly with the low interest rates on mortgages that buyers are currently enjoying) for the mortgage, insurance and taxes on a whole house to be lower than what it costs to rent an apartment. That’s money back in your pocket – every month. (There are also tax benefits to homeownership that renters can’t get.)
- You gain a sense of security. Property ownership has long been a way to build wealth, set down roots and provide for a family’s needs. If your family is growing (or you hope it soon will be), having your own home gives you freedom from a landlord’s restrictions and helps you find a community.
- You get more freedom and privacy. One of the best things about owning your own home is the greater sense of well being that comes with increased privacy. You also don’t have to follow someone else’s rules about what you can hang on your walls, what pets you can have or what you can renovate.
In short: 2022 should be the year you commit, if at all possible, to finding a home of your own. There’s plenty of help available!