Vermont Real Estate Outlook for 2022

It seems everyone knows it’s been a wild year in real estate in Vermont. If you didn’t know that yet, check out our post about the Vermont housing bubble here. As we close out the year we look ahead to understand what 2022 might bring for real estate in Vermont.

Keep reading for our thoughts on what to expect in the Vermont real estate market in 2022.

There’s an old cliche in the industry, all real estate is local. Though this is often the case, it’s important to look at national trends and sentiments to better understand what we will see in our Vermont cities and towns next year; especially considering the impact COVID-19 and out-of-state buyers had on Vermont’s population. 

There are varying reports at the national level as to what to expect. Supply chain issues, a years-long shortage of housing, and reduced labor from the ‘Great Resignation’ make predictable forecasting a challenge for leading analysts. According to this recent Fortune article, national models expect the soaring home price growth to slow down in 2022 while remaining above historic averages. Zillow and Goldman Sachs predict pricing growth to remain in the double digits though not at the historic high of 19% hit in August 2021. Fannie Mae and Freddie Mac take a more conservative approach, predicting price increases around the 7% level, still above historic averages. 

In Vermont, we experienced record-breaking price increases for residential properties across the state with a 22.5% peak in May 2021 (compared to May 2020). This spike held strong through most of the summer before beginning to deflate in August.

At a quick glance, the seasonality of the Vermont real estate market could explain the reduced price velocity we’ve seen in the last few months. However, Vermont homebuyers should be excited to see that prices are increasing at a slower rate than the same period in 2020. As you can see in the chart below, prices in November and December of 2020 were well above the 15% mark compared to prices in November and December of 2019.

So if price increases are starting to slow down heading into the new year, can we expect this to continue in 2022? 

It’s hard to say, but our intuition is that prices will start to plateau after the Spring market. But, this doesn’t mean buyers will be much better off than at the peak of the housing market this past year. 

Don’t confuse a price plateau with a lack of competitiveness. While price increases will, hopefully, slow down, inventory will remain at historically low levels. Fewer people are willing to sell their homes with minimal options on where to go. Further, Vermont home builders are moving as quickly as they can to build new homes, but supply chain and labor challenges are booking most Vermont builders out more than a year.

With the popularity of remote work, the exodus out of cities, and more Millenials entering their prime, first-time home-buying years, competition will remain stiff and favor anyone who is looking to sell their Vermont home. 

What about mortgage rates?

We tapped our friend, Nick Parent, at Vermont Mortgage Company, for his thoughts on what to expect in 2022.

“All reports indicate that we may see rates start to climb slightly as we head into 2022 and throughout the upcoming year. It wouldn’t surprise me if we saw rates around a 3.25% to 3.5% range. The Federal Reserve has announced at least three rate hikes in 2022. Soaring inflation and a reduction of the bond-buying program from the Fed will most likely cause rates to increase from the low levels that we have seen over the last few years. In short, if the Fed takes its foot off the gas and is not buying as many mortgage bonds, we will see rates increase.  Historically speaking, anything in the 3% range should still be considered a phenomenal rate for consumers. I anticipate with the low level of inventory and high demand for housing in Vermont, that 2022 will be another strong year for purchase transactions. I don’t believe rates in the 3’s will slow down the purchase transactions that much if any.” 

Any other year, our 2022 forecast would be considered aggressive growth. But when compared to the last two years, it will feel as though the market is slowing down. But make no mistake, values will remain at their current level with slower growth throughout the year. Further, expect more consumers to look outside of popular Vermont population centers as competition remains stiff.

Interested to learn more about the current market? Connect with our knowledgeable and friendly agents today!