There is no question that Covid has affected every part of our daily lives. Society’s initial response was shock and fear, which was highlighted by the hoarding of toilet paper. This was followed by short-term lifestyle changes and adjustments, including the creation of new terms like social distancing and essential employees/businesses. Society is now in the final phase of acceptance and the establishment of a new normal.

Although not all of the permanent changes brought on by the Covid can be identified at this time, it is clear that the pandemic has permanently changed how we live and work. In this article, we will discuss these changes and the current economic issues to see if we can answer the question “Will Covid Affect Home values in 2022?”

Remote working or working from home is considered one of the largest and most fundamental changes that became a necessity due to the Covid pandemic. Thousands of workers who once commuted to the office were now forced to work from home, and the experts were even surprised that remote working increased productivity, employees were happier and more satisfied with their jobs.

The shift has been so profound that in a State of Remote Work Survey of companies, many of them have created permanent remote worker policies. One thing is clear, remote working is here to stay and the US housing market has been adjusting to this new reality. The effect of this massive shift to remote working is still working its way through the housing market and it may be a decade or more before the changes are fully digested and quantified.

Now that people are working remotely, we expect a gradual but consistent migration of workers from the large urban areas to the more affordable suburbs. But as has been seen over the last year, we also expect an influx of Millenials into the more vibrant and lively urban centers.

Fear Factor

One of the major effects of Covid on the US housing market was the fear factor. Although the fear factor affected the entire United States and still does to a lesser extent, the highly urbanized areas experienced the greatest number of Covid cases and deaths. They also endure the most severe lockdowns and disruptions. For a city like New York that averaged over 1.5 million subway passengers a day before Covid, having a disease as easily transmitted and potentially deadly as Covid was devastating. The same problems were felt in other highly urbanized cities like Los Angeles, Chicago, and Boston.

With the development of patient treatment protocols and a vaccine, these fears have lessened. Subject to a new deadlier variant of Covid arising, we expect the housing market to shake off the last of the lingering effects of Covid, including in the urban areas, and not be a material factor in 2022. Unfortunately, unless the urban centers get their rising theft, violent crime, and other quality of life issues under control, the fear factor of these issues will negatively affect their housing markets.

If you are living in the high growth low tax states like Texas and Florida, you can expect the demand for your home to remain high. However, over the next 12 months, the sales pace is expected to slow as rising mortgage rates and higher home prices create affordability issues. This will be especially true for many first-time buyers who will be priced out of the market.

On the other hand, if you are in New York City, or another city with high crime, high tax, and unending mandates, you can expect housing prices to be under pressure. Depending on how these cities deal with their looming problems, the cities could be in for a rough ride in the short term.

Consumer Confidence

The consumer confidence index measures how people are feeling about the economy and their personal finances. As expected, the confidence of consumers was greatly shaken by Covid but with the arrival of a vaccine and businesses reopening, consumer confidence has risen and is currently at favorable levels. This is a good indicator that, barring any unforeseen issues, the market is doing well and the consumer is not under duress. Providing this remains near its current level, you can anticipate that house prices will hold steady or increase over the next 12 months.

Unemployment Rate

The unemployment and labor force participation rate is another great indicator of the condition and direction of the economy. As with consumer confidence, the indicators were badly shaken during the peak of the pandemic, but over the last 12 months, the unemployment rate is dropping and the labor force participation rate is rising. Both are good indicators for the housing market and the value of your home.

Foreclosure and Delinquency Rates

The foreclosure rate and mortgage delinquency rates are good at indicating the direction of the housing market and the economic strength of the country. As of the writing of this article, this indicator is sending mixed signals. On one hand, the delinquency rate is rising but there are many signs that this is a temporary adjustment due to the long-term effects of Covid. As long as the foreclosure rates do not spike, the additional inventory created by the foreclosures will not have a major impact on the market and the value of your home.

Mortgage Interest Rates

The rise and fall of mortgage interest rates have a direct effect on home affordability and the direction of the housing market. We are currently in a low-interest-rate environment and have been for a prolonged period of time, which is good for the housing market. This trend is expected to change over the next 12 months with many experts predicting 4 rate increases in 2022. This is one indicator you will want to to watch as rising rates will have an immediate effect on housing affordability (higher rates make homes less affordable) and the housing market will adjust accordingly.