CNN Business professionals described 2021 as a white-hot year for the housing market, stating it "was on a wild ride." 

U.S. home sales were on track for the best year since 2006, with an estimated 6 million homes sold in 2021. According to the Federal Housing Finance Agency, home prices increased by nearly 20 percent through the third quarter compared to 2020.

What sparked such an unprecedented year, and what can first-time homebuyers expect in 2022?

To better answer these questions, it's helpful to consider insights from real estate industry insiders, such as David Malcolm. Over the last 40 years, Malcolm has become known for his extensive expertise in real estate and entrepreneurship in the greater San Diego area.

"The amazing opportunity for Americans is our ability to get a fixed-interest-rate loan for 30 years! You can lock in your payment knowing your income will increase over time, but your principal and interest payment remains the same," said David Malcolm.

In other words, homeownership enables the average American family to build wealth and achieve financial stability.

Let's consider the state of the housing market before the COVID-19 pandemic. According to a Mortgage Market Activity and Trends report published by the Consumer Financial Protection Bureau, home-purchase originations in 2019 continued an upward trend dating back to 2011. For those unfamiliar, "origination" is a multi-step process that every individual must go through to obtain a mortgage or home loan. 

4.4 million home-purchase originations for one-to-four family properties occurred in 2019, and the average rate on a 30-year fixed home mortgage hovered between 3.7 and 4.5 percent. Overall, a relatively stable and predictable market.

Fast forward to the first quarter of 2020, the picture starts to change as COVID-19 destabilized the global economy. In an effort to curb the spread of the novel coronavirus, U.S. governments at the federal, state, and local level administered shelter-in-place protocols. While some have categorized these actions as "drastic," they undoubtedly helped save lives, though not without economic side effects. 

According to a report prepared by the Congressional Research Service (CRS), the U.S. unemployment rate soared to 14.8 percent in April 2020. The service industry was disproportionately affected, while many white-collar workers didn't miss a beat as companies transitioned to a remote workforce. Some economists have described this split as a "K" shaped economy or recovery, meaning different parts of the population and sometimes industries recover from a recession at different rates.

In March 2020, the Federal Reserve cut its target interest rates to zero to support the economy during the coronavirus pandemic. As a result, the average interest rate on 30-Year Fixed-Rate Mortgages steadily declined below 3 percent. And those gainfully employed, remote office workers mentioned earlier found themselves in a unique situation.

Zillow noted that approximately 2 million urban renters, typically priced out of homeownership in metro areas near their work, could suddenly afford to buy on the outskirts of the city and beyond since commute time was no longer a deciding factor. Consequently, an enormous number of first-time homebuyers entered a bidding war over a historically low supply of available housing, driving home values up significantly.

As Malcolm points out, "Real estate prices have always increased in value over the long term. However, we have experienced downturns in prices in the early 1970s, 1980s, 1990s, and late 2000s. Trying to buy at the bottom or sell at the top is a fool's game, and my experience tells me a first-time homebuyer is better off buying a home sooner rather than later. Over the last five decades, prices have always had higher highs, so buy whenever you can afford to do so."

Demand for housing in San Diego, which ranks third in the United States for home price growth, has remained steady into 2022 while housing stock has decreased. According to Redfin, as of January 2022, San Diego prices are up 19.3 percent compared to the same time last year. Homes spend, on average, only 11 days on the market, far less time than in most previous years.

While these data points are helpful, additional factors are at play outside the control of the first-time homebuyer—notably, supply chain disruption.

"All building costs have been negatively affected by the supply chain. These additional costs have hit the first-time homebuyer especially hard," said Malcolm. "The lumber price increase, up to $30,000 on a new home, has priced many first-time homebuyers out of the market."

He further explained, "While the experts are saying this ‘supply chain’ situation should right itself by the end of 2022, they assume we will not have a new variant of COVID-19 in 2022. They also believe the labor shortage (especially for truck drivers) will 'right itself' in 2022. I'm concerned that at least one of these issues will remain a problem past 2022."

As home values continue to increase, low- and moderate-income individuals and families are bound to face difficulties. Homeownership should not be so out of reach and excluded during such a market for only those who can put down all-cash offers or pay the high expense for a newly built home. Malcolm holds the government accountable for factors beyond an individual's control for a long-term solution. 

"The Federal Government needs to continue to support long-term, fixed-rate financing for homebuyers, and it also needs to continue to support both VA and FHA loans for our veterans and those who need a little help with their home purchase," stated Malcolm.

However, those attempting to purchase their first home during these unforeseeable times are not without help. The San Diego Housing Commission (SDHC) provides a First-Time Homebuyer Program, offering potential assistance to those purchasing a condominium, townhome, or single-family home within the City of San Diego. Primary funding of this program comes from grants administered by SDHC provided to the City of San Diego through the federal U.S. Department of Housing and Urban Development (HUD) HOME Investment Partnerships Program. 

“Homeownership is a crucial part of living in the United States of America. While it’s only natural for some prospective first-time homebuyers to feel skeptical about the housing market, my experience tells me more opportunities will arise, despite the volatility seen in the past couple of years. I will say it again – buy when you can," concluded Malcolm.

About David Malcolm

David Malcolm of San Diego is an influential real estate professional, entrepreneur, and community leader with over four decades of work experience. Mr. Malcolm is an esteemed graduate of Harvard Business School's Presidents Program, a licensed real estate agent and broker, and a Certified Commercial Investment Member (CCIM). He has run and advised multiple public and private companies and held several municipal and statewide public offices.