NASHVILLE, Tenn. (WKRN) — The 2021 real estate market was a whirlwind for many, with hopeful buyers wondering what to expect in 2022.
Final numbers for 2021 indicate there were 47,172 homes sold in the region, compared to the 44,850 closings in 2020, with sales up five percent.
Will the new year resemble the old? Partially.
Steve Jolly, President of Greater Nashville Realtors, says there are three specific things to watch for in 2022: supply, appreciation, and interest rates.
We’ll start with supply or the lack thereof.
Inventory at the end of December was 3,624 down from 5,722 in December 2020.
“If you look at new listings in the Nashville market, new listings were down 34.5% in December,” Jolly said, adding that one of the biggest challenges moving into 2022 will continue to be a lack of inventory.
For those patiently waiting to buy their dream home or perhaps their first home, it’s not what you wanted to hear.
“In 2021 the median home prices increased about 22.4% across Middle Tennessee,” Jolly said.
The median price for a residential single-family home was $437,362 and for a condominium, it was $298,918. This compares with last year’s median residential and condominium prices of $345,000 and $245,000, respectively.
“I still think we will see prices rise in 2022,” Jolly said.
Expert projections for home value increases in 2022 range from six percent up to a high of 19.8% locally.
“I expect appreciation to be eight to 10%,” Jolly said.
Jolly says the biggest challenge will be rising interest rates due to inflation. In December, the Federal Reserve announced they would be eliminating their bond purchases by March of 2022, putting upward pressure on mortgage interest rates, Jolly wrote. What’s more, The Federal Reserve is also planning to raise the federal funds rate up to three times per year between 2022 and 2024.
“Rising interest rates are going to be the number one threat to the Nashville market in 2022,” Jolly said. “If you’re thinking about buying a home I would start working on that now for every one percent increase in interest rates buyers lose 11% of purchasing power and that can really hurt in a market where prices are already high.”
To break it down by price, if you were approved to buy a $400,000 home with interest rates at three percent, then an increase to a four percent rate brings your approved purchase price down to $356,000. It makes quite the difference!
Jolly says if you plan to buy a home this year, it’s imperative that you start early.
“If you’re interested in buying a home in 2022, right now is probably you’re best opportunity to be looking for homes, finding available inventory with the least amount of competition,” Jolly said.