Compass, Inc., a leading technology-enabled residential real estate brokerage, today released the results from its 2022 housing forecast that surveyed over 100 real estate agents throughout the Chicagoland area. According to the survey, Chicago real estate agents predict inventory will begin to increase in 2022, but pent-up demand will outweigh the incoming supply, driving competition and price growth that will continue to give sellers an advantage in the market. Additionally, agents believe mortgage rates will increase over the course of the year, putting additional pressure on first-time homebuyers, while additional space will be the most sought-after amenity in 2022.
Housing inventory will begin to recover after rapid declines in 2021
After steep declines in 2020 and 2021, Chicagoland agents are expecting inventory to creep back into the market, however, pent-up demand will prevent a substantial increase of homes from accumulating. According to the survey, 44% of Chicagoland Compass agents predict inventory will increase, while 39% believe it will stay the same, and 18% believe it will continue to decrease. This led 66% of agents to predict that 2022 will continue to favor sellers.
“We will still be feeling the pinch of inventory at many price levels. Entry-level homes will still be hot with a ton of competition, which will likely result in multiple offers, especially if the home is in tip-top condition,” said Amy Foote of The FOOTE Team. “As rates start to creep up, I think we’ll see a temporary increase in demand as well since buyers will want to take advantage of the great rates before they go any higher. With lower inventories and rising rates, we’ll see similar competition to 2021. I think supply chain issues with new construction will get worked out and newly constructed homes will take on some of that demand and this infusion of inventory will help normalize the market. In the end, I don’t think 2022 will be a normal market, but it will be on the way back to one.”
Housing prices still have room to grow
The housing market hit new highs throughout 2021, but Compass agents believe there is still room for home prices to grow in 2022. As unmet demand from 2020 and 2021 spills over into 2022, and a growing wave of millennials continue to enter the market, home prices are expected to reach new highs in the Chicagoland area, according to Compass agents. According to the survey of over 100 Chicagoland Compass agents, 63% forecast an increase in sale prices. Additionally, Compass agents predict renters will also be facing price increases, as 70% of Compass agents believe rent prices will also increase in 2022.
“There’s a lot of pent-up buyer demand. For nearly two years people have been working from home and slowly migrating back to their downtown offices,” said Nathan Binkley of Binkley Residential. “I expect the majority of folks head back to the office in 2022 and I think we’ll see an increase in demand and therefore prices in markets like West Loop, based on the proximity to the downtown office markets.”
Rising mortgage rates will add to first-time homebuyers’ woes
Rising home prices, a lack of inventory, and bidding wars have led first-time homebuyers to struggle over the last couple of years. The silver lining to all of this has been record-low mortgage rates that have kept affordability in check. Unfortunately, many Compass agents believe the days of near 3% mortgage rates are over. According to the survey, 81% of agents believe mortgage rates are going to increase in 2022. On average, agents believe mortgage rates will end the year around 3.74%.
The rise in mortgage rates will add additional pressure to first-time homebuyers in 2022. According to the survey, 42% of Compass Chicagoland agents believe first-time homebuyers will face even greater challenges in the new year. Forty-two percent believe they will face the same amount of struggle as they did in 2021, and 16% believe they will struggle less than they did in 2021.
Homebuyers will continue to seek out more space in 2022
The pandemic drove many homebuyers to reassess their needs as many facets of life began to rapidly change. Buyers began to move from crowded downtown metros to suburban homes as they sought greater outdoor space and home offices. These trends of more outdoor space and home offices for remote work will continue to drive buyers in 2022. According to the survey, a home office space (37%) will be the most sought-after amenity, closely followed by greater outdoor spaces (35%).
“All of my buyer clients last year searched for homes with more space, inside and out. They were leaving their small city condos and suburban homes in search of a forever home with a home office, fitness room, a larger kitchen, and outdoor living,” said Nena Negovanovic of the Smothers Group. “Homes that are equipped with flexible living spaces, a family-oriented kitchen, and a functional backyard will be in demand. Location will always be the most popular request when searching for homes, so neighborhoods with a downtown and train station will also be popular.”
In addition to outdoor space, many buyers will also seek out updated homes with newer kitchens. According to the survey, updated kitchens were voted as the third most desirable amenity at 19%.
Compass surveyed over 460 Compass agents across the various markets in which Compass operates between November 16, 2021 and December 7, 2021 in an online survey. In Chicagoland, 102 agents completed the survey. The survey was designed and fielded, and the results were analyzed by Compass. While all Compass agents were given an opportunity to participate, the survey results may not be representative of the views and forecasts of all Compass agents. Further, the survey results may be subject to certain biases. All forecasts, views, and statements included in this press release, other than historical statements about Compass, are based on the results of the survey.