2021 Market Wrap Up
Much like 2020, many unique trends emerged in 2021. Homebuyers were still interested in moving to the suburbs; the continued work-from-home changes had families looking for more space; and the minimal time that homes spent on the market forced buyers and sellers to move quickly to close deals.
Home sales hit a 15 year high in 2021 with the median sales price increasing by over 13% and even climbed over 30% in some places. Inventory hit an all-time-low in May 2021. It slowly crept up throughout the summer and into the fall but demand far outpaced supply. This can be attributed to low interest rates. For many people, even though they were paying more for their homes, the low interest rates generated even lower monthly payments compared to years prior.
Lack of inventory was the most difficult aspect of a Realtors® job in 2021. In most places throughout the Twin Cities, there was rarely more than two month’s supply of housing available for homes at the most affordable price points. For reference, a normal and stable market would have approximately 5-6 months supply in any given municipality. Some places even saw less than two weeks’ worth of supply. In Spring of 2021, 74% of homes were getting multiple offers. The market has calmed slightly with only 60% of homes facing bidding wars. This brought about the trends of paying well above the list price, waving inspections, buyers paying for closing costs, etc.
With the obvious sellers’ market of 2021, many were worried about the housing bubble “popping”. While the market is expected to remain a sellers’ market for the next few years, economist state that the market is much more stable than the infamous 2008 crash. In fact, 2021 is poised to be the first year in history in which residential real estate transactions will surpass $2 trillion. According to Yahoo News “Even if rates continue to rise, there’s simply not enough supply for demand to crash”.
2022 Market Projections
While 2022 is still anticipated to be a sellers’ market, it is likely that it will be at a calmer pace than 2021. In the Minneapolis/Saint Paul metro area, there is an expected 4.1% increase for home sales changes and 6.0% for home price changes.
Many of 2021’s trends will continue including movement towards the suburbs and Millennials as the predominate demographic as first-time homebuyers with over 45 million at “prime homebuying age”. Unfortunately, the National Association of Realtors®’ Chief Economist, Lawrence Yun, expects the challenges surrounding affordability to continue. More homes will be available, which will likely mean a 16 year high for home sales. Mortgage rates are also expected to remain around 3.3% for the year but with a slight uptick to 4% by the end of 2022.
According to Danielle Hale, Realtor.com’s Chief Economist, increased diversity in the housing market will be a driving trend in 2022 with Hispanics “expected to play a growing role in the homebuying market”. According to the National Association of Real Estate Brokers’ 2021 State of Housing in Black America report, the national average for Black homeownership is 45.3% but in Minneapolis/Saint Paul the Black homeownership rate is only 25%.
Some economists anticipate that the Midwest will see a population increase due to the lack of affordable inventory on the coasts, especially as some companies transition to fully remote work. The pandemic will remain a primary influence on the market. Covid has directly affected markets for the last two years and will continue to do so through interest rate changes, changing priorities, pandemic relief funds, etc. With the Omicron variant’s recent discovery and new supply-chain concerns, Covid will continue to impact the economy throughout 2022 and beyond.