2022 Homebuying Trends
Which Changes Are Here to Stay?
By Matthew Woodhouse
Now that the frenetic pace and unprecedented challenges spurred by the COVID-19 pandemic have calmed a bit, the residential real estate market is settling into a steadier balance as we look toward the new year. The record low mortgage rates that lured so many homebuyers into the market in 2020 and 2021 are forecast to creep upward yet remain favorable, the competition for homes will cool as inventory levels continue to rise and home prices will increase at a more reasonable clip.
What will be interesting to see in 2022 is how homebuyers will behave in the wake of this historic moment in time. In addition to serving as a catalyst for record high origination volume, the pandemic accelerated the adoption of mortgage technology, opened consumers’ minds to evolutionary ideas — buying a home sight unseen, for example — and spurred migration to the suburbs. As a result, the following five trends are likely to emerge or continue throughout the coming year.
Trend 1: Consumers will increasingly seek out lenders who can deliver digital experiences.
Mortgage technology had already been gaining momentum when the pandemic struck. Then the isolation resulting from contagion concerns as well as mandated shutdowns sent that momentum soaring. Consumers embraced a self-serve approach to everything from electronically scheduling their appraisals, inspections and closing appointments to e-signing their closing documents.
In fact, according to ServiceLink’s State of Homebuying Report, 89% of millennial and Gen Z homebuyers reported using technology during the homebuying process. Across age groups, 68% said they had used technology. These homebuyers overwhelmingly agreed that their perception of the homebuying process had been improved by technology. They cited the convenience and ease of use plus time savings as the primary benefits of using mortgage technology.
This increasing confidence in, and growing reliance on, technology has fueled consumers’ desire for a seamless, transparent, fully digital homebuying experience. In growing numbers, they will choose lenders that can deliver tech-enabled experiences in 2022. Fortunately, lenders have access to a broad range of digital mortgage solutions that can not only improve the customer experience but also increase internal efficiencies (think hybrid appraisals and AI-powered title decisioning). Every step lenders take to accelerate the journey to the closing table will work to their advantage in 2022.
Trend 2: Investors will rely more strongly on technology.
As inventory recovers and consumers continue to seek more space in the new hybrid work environment, the 2022 market holds great promise for savvy investors. Whether their strategy is to buy and hold or fix and flip, speed will be critical, as competition for properties is likely to persist throughout the year. Investors will increasingly look to technology to give them the edge.
For example, through digital auction sites, SFR and fix-and-flip investors can now search properties in foreclosure, make offers and close digitally, without having to go to the courthouse. Digital title services, hybrid valuation products (AVM, BPOs and appraisals) and portfolio management tools powered by AI and machine learning will also help fuel investor success, by helping them improve their efficiencies and take advantage of cost-saving opportunities.
Trend 3: The confidence to buy a home sight unseen will continue to grow.
In November 2019, 32% of respondents to a Redfin survey who had purchased homes in the past year said they had made at least one offer on a home they hadn’t seen in person. In December 2020 that percentage nearly doubled, to 63% of respondents. Travel concerns and social distancing requirements, intense competition for properties and the growing availability of online video tours provided the impetus for homebuyers to bid sight unseen.
Think about it: You want to buy a home, let’s say in another state, but hopping on a plane isn’t your first choice in the middle of a pandemic. And even if you did make the flight, by the time you got there, another buyer may have already closed the deal. That’s why, in the COVID-19 environment, virtual walkthroughs were a dream come true for buyers and sellers. They enabled prospective buyers to get a good look at a particular home and place a timely bid.
As with other technological solutions, now that consumers have been introduced to virtual tours and recognize their value, they’re coming around to giving them a try. In fact, nearly one in five respondents to the ServiceLink homebuying survey confirmed that, moving forward, they would consider buying a home without seeing it in person.
Trend 4: Previously hesitant homebuyers will enter the market.
While no one’s looking for a pendulum swing from seller’s market to buyer’s market in 2022, we can certainly expect movement toward the middle. And as the environment grows increasingly buyer-friendly — with more inventory, fewer bidding wars, stabilizing prices and relatively low interest rates — homebuyers who have been patiently waiting in the wings can make their move.
Among respondents to the ServiceLink survey, one-third said they had considered but ultimately decided against purchasing a home in the time period of April 2020-April 2021. Why? Thirty-four percent decided to upgrade instead, 31% felt the available homes were too expensive and 24% faced a change in their financial situation.
It’s not at all surprising that nearly a third of respondents found homes to be too expensive, given prices rose so dramatically in 2020 and 2021. According to Freddie Mac, house price growth was 11.3% in 2020, and is expected to be 16.9% for 2021. Fortunately for buyers, Freddie forecasts price growth will slow to 7% in 2022. This adjustment, coupled with relatively low mortgage rates — Freddie looks for an average 30-year fixed rate of 3.5% in 2022, compared with 3.0% in 2021 and 3.1% in 2020 — and more choice in listings, should bring more homebuyers to the table.
Trend 5: Families will continue moving to the suburbs.
The remote work model made commonplace by the pandemic has caused people to think differently about their surroundings. If they’re going to work from home, whether on a full- or part-time basis, don’t they deserve roomier accommodations? Plus, those who no longer have a daily commute into the city suddenly have more flexibility in choosing where to locate. Many homebuyers — in particular, millennials looking to raise families in neighborhoods with good schools — are moving to the suburbs, a migratory trend that’s likely to continue in 2022.
When ServiceLink surveyed homeowners in the spring, 36% of those who had purchased a home in the past year said they did so to upsize from their current home; 23% cited needing more space to work remotely. Additionally, 40% of those respondents had moved to another state. Widespread adoption of flexible work models by employers is affording homebuyers much more choice in where they put down roots. Going forward, many of them may be choosing the suburbs instead of city hubs.
