First-Time Home Buyers Face Challenges Within 2022’s Real Estate Market

As mortgage rates rise across the United States, prospective first-time home buyers face continual challenges to their pursuit of homeownership. After hovering near record-low rates throughout the earlier portion of the coronavirus pandemic, mortgage rates now returned to early 2020 levels.

While this doesn’t represent a complete barrier to entry, it may come across as discouraging for those with set budgets for their homeownership aspirations. Unfortunately, mortgage rates don’t make up the sole obstacle for first-time buyers.

Limited Housing Inventory

Since the now-infamous 2008 Housing Bubble, housing inventory remained low throughout the United States. As of last month’s housing starts report, national housing inventory sat at just a 1.8-month supply. For reference, a 6.0-month supply reflects a balance between home buyers and home sellers. That said, the Chicago market still experience plenty of growth.

“Despite a continued decline in inventory in December, caused by market seasonality and inventory shortages, we still saw positive momentum in the Chicago market,” Antje Gehrken, president of the Chicago Association of REALTORS®

In fact, national existing home sales just hit their best year since 2006. While this demonstrates a strong real estate market, one of the other major shifts comes from property appraisals

Soaring Home Prices

In tandem with the limited housing inventory, home prices continue their upward momentum. As of last month’s Existing Home Sales report, the median existing-home price increased to $358,000, 16% higher than the previous year. To compensate for the rising prices, prospective home buyers are taking out larger mortgage loans.

“Prospective buyers still face elevated sales prices in addition to higher mortgage rates. The heavier mix of conventional applications again contributed to another record average loan size at $453,000,” said Joel Kan, a Mortgage Bankers Association economist.

Furthermore, rental prices are rising as well. As a result, many home buyers are gravitating towards cheaper properties to escape the rental market and begin their journey into homeownership.

Summary

As we progress into 2022, rising mortgage rates, limited housing inventory, and soaring home prices present unique challenges to prospective first-time home buyers. However, real estate experience and familiarity with the Chicagoland market offer great advantages to counterbalance the obstacles.

For legal guidance with buying or selling a property, schedule an appointment with the real estate attorney at Lee Scott Perres, P.C.