2021 was a phenomenal year for housing for anyone selling, building, or transferring property. It wasn’t as easy if you were a home buyer as you likely faced stiff competition. Challenges like lack of new and existing inventory, rising values, and more demand than supply made it one of the strongest seller’s markets in history.
In the great Waukesha 7-County area we saw average sales prices exceed the listing price by .8% on existing homes and 1% on new homes. Days on the market dropped to around 30 days on market which means once the home is listed it sells almost immediately.
So what’s in store for 2022?
We predict another solid year for housing but we expect it to cool down slowly throughout the year. The low interest rates 3.07% will be going up. Expect at least 3 Fed rate increases and 3.9% interest rates by fall.
This will reduce demand slightly, and allow inventory levels to rise up a bit to more normal levels. While we still expect to see gains on home values in 2022 expect lower single digit gains this year as rate increases slow buyer activity. The plus side to slightly higher rates is that many of the investment companies will stop buying properties with higher rates and make room for some more entry level buyers.
As far as new construction activity nationally we expect to see about 1.1 million home starts for 2022 which is slightly more than 2021. The number would be greater however, lot supply, lack of skilled labor, and serious supply chain issues will extend production lead times and hold back construction.
Speaking of supply chain issues, we are seeing lead times of over 12 weeks on the following products: Windows, Cabinets, Exterior doors, Garage Doors, Custom plumbing fixtures to name a few. This is about three times the normal lead time. These products will also likely cost more.
Speaking of costing more, lumber is back on the rise. After maxing out at $1400 for 1000 board feet in May of 2021, it dropped to about $450 per 1000 feet in Fall. It has been bouncing back up and now that the Biden administration doubled the Canadian Lumber tariff from 9% to 18%, prices on an average home are up $10,000 from fall. Lumber mills have not increased production to meet the demand.
The other pricing challenge will be lot availability and prices. The average lot for sale in the 7-County area in MLS is $159,742 and the average lot sold for roughly $24,000 more than the previous year.
