There’s no doubt the 2021 housing market has been hot — like sizzling hot — in terms of how much buyers are paying for houses, what kinds of concessions they’re making, and how much cash they’ve sometimes ended up bringing to the closing table. 

According to real estate company Zillow, 2021 created a frenzy for home buying. This wasn’t a singular event, though, Zillow says. Rather, it speaks to a demographic clash between two generations: Baby Boomers and Millennials. It turns out, they’re not just two of the largest generations in U.S. history; they’re also fierce competitors for homes. That is what created this current “seller’s market,” which means people who were in the prime position of selling a home in 2021 likely got at least their home’s listing or asking price — and often more. 

For a lot of people, buying a house is the most exciting time in their lives. Home ownership is the American Dream come to life, after all. But there are a lot of things to consider when buying a house. Thinking about playing your hand at the real estate game in 2022? You may want to consider these questions first before diving headfirst into the home-buying process. 

Is 2022 a bad time to buy a house?

Truthfully, there are some pros and cons to buying a house in 2022. On the plus side, you will have some of the lowest interest rates in history. That’s important because when the cost of borrowing money is so low — 30-year mortgages are under 4% and 15-year mortgages are under 3% — you can buy “more house” and, in the case of a shorter mortgage, perhaps pay it off quicker. That saves you money on interest for the life of the loan. 

On the negative side, the home-buying process has become more competitive. Home prices are much higher than normal, and some homes are going for over the asking price by thousands of dollars because of buyer bidding wars. There will always be reasons to buy, and there are always reasons to wait. You should work with your lender and real estate agent and read up on the topic — on the PODS blog, for example — to determine whether you feel comfortable buying in this kind of hot market. 

. . . look at the end of 2020 and the beginning of 2021 . . . homes sold in hours if not days, people were paying over asking price, bidding wars had prices going beyond appraisals, and buyers were waiving appraisals to close faster.

Will house prices go down in 2022? 

There are two possible answers to this question. The first: Yes, prices are likely to go down somewhat in the short term in this current housing market. For the second answer: No, prices will not go down enough to find “bargain” prices on a home. 

To explain that first answer, you have to look at the end of 2020 and the beginning of 2021, when there was a surge in home buying nationwide — homes sold in hours if not days, people were paying over asking price, bidding wars had prices going beyond appraisals, and buyers were waiving appraisals to close faster. Some people even cashed out financial accounts to make all-cash offers, which allow for faster closings (and are sellers’ favorites). 

That said, buyers making home offers have calmed down somewhat since then, resulting in the second half of 2021 being a little more of a realistic housing market. Homes are taking days if not weeks to sell (albeit still incredible), and the prices are closer to what the seller is asking or slightly under. However, prices are likely to remain higher in bigger cities, where there may not be enough land to build on or builders willing to put up new houses — and that puts pressure on existing homes to meet the needs of all new buyers on the market. 

What should I consider when buying a house? 

There are many things to consider when buying a house, and your wants and needs are key to this. This is a decision that starts with your budget and ends with your wish list, especially if you are a first-time home buyer. Consider:

  • Your lifestyle: Are you on a strict budget and want to find a smaller home with a relatively smaller price? Or do you want to live a lavish, more high-end lifestyle, with luxury amenities, such as a swimming pool, extreme landscaping, more bedrooms, and a gourmet or upscale kitchen (and, in turn, a larger house note).
  • The neighborhood: Is it safe? Are there good schools nearby? 
  • Your family size: Do you want kids or pets, if you don’t already have them? Will space be an issue?
  • The overall expenses: The negotiated sales price will likely not be the final price of the home. Think about overall expenses when buying, such as the home-inspection cost, appraisal cost, and additional closing costs. You will also want to know your credit score for buying a house. 
Did you know? Whether you decide to buy now in the current housing market or later, PODS portable moving and storage containers can make the transition easier. Pack and load on your own schedule with a container located conveniently in your driveway. We’ll pick it up and take it to your new place or store it at one of our Secure Storage Centers for as long as you need.
A down payment underneath a set of new house keys

How much should a down payment be?

When it comes to a down payment for a house, buyers generally put down between 3% and 20% of the home’s overall price — the larger the down payment, the better. That is tough for first-time home buyers, since they don’t have property to sell first to potentially help with the down payment. However, low mortgage rates mean a house can be more affordable, even with a smaller-than-typical down payment. Keep in mind that you may end up in a bidding war if you live in a hotter-than-average home market, though, so be prepared for house counter offers and multiple bids by having your financial house in order with a good down payment. This is where your lender and real estate agent can give you some great advice that is specific to your individual situation. 

What are mortgage rates looking like? 

Mortgage rates are lower than they have been in decades and are likely to stay that way for the next year, most financial institutions agree. This is especially important when thinking about things to consider when buying a house. However, the rates are slowly creeping back up — very slowly, so don’t panic — because the overall U.S. economy is getting better post-pandemic. Ideally, if you can get a lower mortgage rate for your loan, you will pay less in interest and your monthly payment will be more affordable for you as part of your overall housing costs. If you have to negotiate a higher offer because a home has multiple bids as a buyer or a seller, you’ll want to save as much as you can in other areas, such as mortgage costs and homeowners insurance. 

Closing costs are expensive — typically, 2% to 5% of the loan’s overall cost.

What is included in closing costs? 

Traditionally, closing costs are the fees and other charges that buyers have to pay when they complete their home purchases. This includes items such as mortgage insurance, homeowner’s insurance, appraisal fees, and property taxes. You likely also will need to pay a commission to your real estate agent for their help in the purchase. Closing costs are expensive — typically,  2% to 5% of the loan’s overall cost. That means you’ll want to make sure you’ve saved enough to cover these costs when you get to closing. 

Insider Tip: Owners have many options when it comes to home offers, so you may want to consider covering some of their closing costs when making an offer

How do you determine your debt-to-income ratio?

This is where an online calculator or your real estate agent comes in handy. You need to determine your monthly bills, which includes your rent, groceries, or other regular costs — all essential things to consider when buying a house. You divide that total by your gross monthly income, which is defined as your take-home pay before taxes are deducted. Then, you have that key ratio, which tells your lender and a potential seller whether you have enough money to successfully buy that house. Buying and selling during the pandemic has been challenging, so it’s a good idea to have your financing and finances in hand as you go through the home-buying process. 

Prices are staying up, most financial gurus say, and you will be renting for too long if you are hoping for prices to plummet, given the other market tensions and issues.

If you sell, should you rent versus buying in this market? 

This depends on where you are in life. If you are looking for a smaller place because your previous home fit your family and now they’re not living with you, you may want to look to rent for a time before finding something new. If you are waiting on the market to “cool down” more so you can buy back your old house at a lower price or buy something as a bargain, though, you are likely to be disappointed right now and well into the near future. Prices are staying up, most financial gurus say, and you will be renting for too long if you are hoping for prices to plummet, given the other market tensions and issues. Really think hard about what you want out of the sale of your home. It may feel like there are so many things to consider when buying a house, but you’ll be happier if you have a long-term plan in place before accepting an offer or buying something new. 

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Karen Dybis is a freelance journalist and a frequent contributor to the PODS blog. Her work has appeared in Time magazine, U.S. News & World Report, The Detroit News, and more.