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Real estate and mortgage predictions: What’s in store for 2022?

The past two years have witnessed a frenzy in new and second-home purchases, given the historically low mortgage rates, housing shortage, and shifting workplace dynamics during the pandemic. According to the chief economist of a leading real estate mortgage firm in the US, home sales will increase by 6.6% and prices by 2.9% in a whirlwind 2022.

As it continues to be a sellers’ market, here are some of our predictions for 2022:

  • Mortgage rates will rise ‘slightly’:
  • For years, mortgage rates have remained stable and on the lower side. Now that we are still grappling with COVID-19, the rates aren’t expected to go much higher in 2022.

  • Home prices will continue to rise:
  • There is a severe lack of inventory and a large number of prospective buyers, especially the millennials who have the surplus income to buy their first home. As the laws of economics go, the prices will rise. According to the estimates, the rise could even be up to 16%.

  • Cash buyers will increase:
  • Cash buyers tend to get better deals and have a higher bargaining position than those who rely on finance. But everyone may not have $400,000 or $500,000 in their bank. This has led to the emergence of  many companies in the market willing to make a cash deal on your behalf and later finance the property to you.

  • Cash-out refinances will increase:
  • Since this is a seller's market, most homeowners are already sitting on a surplus amount even if they pay off their existing mortgage. This will entice them to upgrade their homes with the surplus amount and even opt for a slightly higher mortgage rate or a second mortgage.

  • The bidding wars are not getting any better:
  • Even if the mortgage rates are a bit higher, it won’t bring the prices of the houses down. Rather, it will create a bigger frenzy to buy homes from the already low inventory. Buyers will be more aggressive in order to win the bidding war.

  • Home sales volume may remain flat:
  • Given the limited inventory, there is also a concern that homeowners may not sell. There is a dilemma about the right combination of price and location, if available. The states with low cost of living in the US aren’t so economical anymore.

  • Buyers will purchase a second home for investment:
  • Even if the rates are skyrocketing, first-time home buyers will continue to buy closer to their workplace. Cash-rich millennials will even consider buying a second home for investment.

However, the real estate and mortgage industry has moved at a glacial pace. The typical time it takes to consummate a loan is 50 days. This is clearly because technology hasn’t penetrated as fast as it has compared with other industries.

Why the mortgage business needs technology transformation?

Today’s customers hunger for instant gratification - from instant, hot meals and their favourite restaurant to the latest electronics at their doorstep within hours and minutes - and swiftness is the mantra for businesses to grow. To deal with this kind of demand, key players in the mortgage business need the following capabilities up their sleeve:

  • Make faster decisions:
  • Borrowers need to know at every point where they stand in the mortgage process. While wiring the money within a few hours may not be possible, it is possible to give an instant ‘yes’ or ‘no.’

  • Virtual home appraisals:
  • With all the houses changing hands, it isn’t possible for property appraisers to physically visit and still keep the lead time low. If virtual visits could replace the physical ones, appraisers could make the process faster.

With technological transformation like artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and analytics in business processes, the real estate sector can be at par with customer expectations and experience.

For organisations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organisational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organisations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organisations that are innovating collaboratively for the future.

How can Infosys BPM help?

Infosys doesn’t just ‘advise’ but assists lenders in their digital mortgage transformation journey. We bring forth a solutions-based approach with people, processes, and technology (partners and in-house). With a dedicated Mortgage Centre of Excellence (CoE), we leverage the experience of 50+ clients to help you with the best practises.

Read how our digital mortgage service offerings can help set efficient mortgage trends in the future for your company.