Home buyers may be facing less competition, but they are also finding fewer homes for sale.

In November, 59.5% of home offers written by Redfin real estate professionals reported facing competition, the lowest in 11 months, according to Redfin’s competition index. That’s a sharp drop from the 74.6% peak reached in April.

Make no mistake, bidding wars are still happening and buyers should still be prepared to face one. But the lessening in buyer competition lately appears to be following a more seasonal pattern for the housing market. “It’s typical for competition to ease in the winter months as more families take time off for the holidays,” says Daryl Fairweather, Redfin’s chief economist. “While competition waned in November, it was still higher than a year earlier, which is a sign that demand will be strong in the new year.”

The markets with the highest number of bidding wars in November, according to Redfin’s index, are Richmond, Va. (80% of offers faced a bidding war); Salt Lake City (73.8%); San Diego (72%); Honolulu (71.1%); and Dallas (70.6%).

Many buyers are still losing out to the competition during their home search. REALTORS® report that on average, their buyer clients have made two prior unsuccessful offers on a home, according to the REALTORS® Confidence Index Survey from October, the latest available. Forty-two percent of offers are above the list price, lower than 55% in June this year, NAR’s report notes.

The following chart from October’s REALTORS® Confidence Index Survey shows the average number of offers received on sold homes.

In a new report, the real estate firm Walker & Dunlop calls it “the golden age for multifamily.”

High rents in the apartment sector are expected to continue in the new year as demand remains strong. Potential home buyers who have been shut out from the competitive housing market are turning to rentals in swarms. Property owners are expected to see record profits in 2022, predicts Green Street, a commercial real estate analytics firm.

Strong demand has allowed building owners to continue to increase their rents. Asking rents have climbed nearly 20% during the 12-month period in November, realtor.com®’s data shows.

The increase in rents is expected to lead to a 13.5% uptick in net operating income for building owners, which is expected to outpace the office, retail, lodging, and student housing sectors, according to the Green Street report.

But will tenants be able to weather the higher costs? “In a lot of these places, minimum wages have been rising, but not enough to keep pace with the rent growth,” Danielle Hale, chief economist at realtor.com®, told The Wall Street Journal.

Higher payments could prompt more people to move in with roommates or family. However, so far, property owners say they haven’t seen that happen.

“We see people staying put,” Thomas Grimes Jr., chief operating officer of Mid-America, a firm that specializes in middle-income buildings in the Sunbelt, said during an October earnings call. The company has reported it was raising rents by 13% for its renewing tenants.

Realtor.com® forecasts that asking rents will rise in 2022 at a rate of more than 7%. The cities with the highest gains in 2021 are expected to remain strong in the new year, including Austin, Texas; Miami; Memphis, Tenn.; and Jacksonville, Fla.

For the second quarter in a row, home flipping was on the rise as investors look to take advantage of quickly rising home prices. However, they’re not seeing higher profits from their flips.

Home flipping comprised 5.7% of all home sales in the third quarter, up from 5.2% a year ago, according to the “2021 U.S. Home Flipping Report” released by ATTOM Data Solutions. The typical raw profits remain below where they were a year ago, and profit margins have decreased to their lowest point since early 2011, the report notes.

Researchers define a house flip as an arms-length transaction that occurred in the purchase and sale of the same property within the last 12 months.

Profit margins declined in the third quarter as prices on flipped homes continued to rise more slowly than they did compared to investors’ original purchase price of the properties, researchers note.

In the third quarter, the gross profit on typical home flipping transactions—the difference between the median sales price and the median paid by investors—was at $68,847. That is down 1.6% compared to the $70,000 level recorded in the third quarter of 2020.

The decrease in the typical profit margin from the third quarter of 2020 to the same period this year was the largest annual drop since early in 2009 when the housing markets were reeling from the Great Recession, researchers note.

Still, investors are netting about a 32.3% return on investment compared to the original acquisition price.

“Home flipping produced another round of competing trends in the third quarter of this year as more investors got in on the action but got less out of it,” says Todd Teta, chief product officer at ATTOM. “It’s clear that declining fortunes weren’t enough to repel investors amid a typical scenario of 32 percent profits before expenses on deals that usually take an average of five months to complete. We will see over the coming months whether the amount they can make on these quick turnarounds will still be enough to keep luring them into the home-flipping business or start pushing them elsewhere.”

Here are some additional insights from the latest home flipping report:

• The median $281,847 resale price of homes flipped in the third quarter generated a gross flipping profit of $68,847 above the median investor purchase price of $213,000.
• The markets with the largest returns on investment during the third quarter on home flips were in: Buffalo, N.Y. (ROI of 103.6%); Oklahoma City, Okla. (127.6%); Florence, S.C. (125.8%); Pittsburgh, Pa. (124.6%) and Scranton, Pa. (123.2%).
• The metro areas with the smallest profit margins on a typical home flip in the third quarter were: Laredo, Texas (7.5% return); Boise, Idaho (8%); Gulfport, Miss. (8.4%); Lubbock, Texas (10%); and Portland, Ore. (10.1%).
• Homes flipped in the third quarter took an average of 147 days to complete the transactions, the shortest turnaround in more than a decade.

Mortgage rates rose this week after the Federal Reserve announced it would accelerate its bond tapering and that three rate hikes would come in 2022. The 30-year fixed-rate mortgage rose to 3.12% this week, Freddie Mac reports.

Rates are largely expected to continue to rise due to the Fed’s recent announcement. But National Association of REALTORS® Senior Economist Nadia Evangelou says home buyers shouldn’t panic. By historical standards, mortgage rates will remain low and under 4% over the next year. In 1980, the average 30-year fixed-rate mortgage was 13.7% and 8% in 2000.

This week “mortgage rates inched up as a result of economic improvement and a shift in monetary policy guidance,” says Sam Khater, Freddie Mac’s chief economist. “While house price growth is slowing, prices remain high due to solid housing demand and low supply. We expect rates to continue to increase into 2022 which may leave some potential home buyers with less room in their budgets on the sideline.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Dec. 16:

• 30-year fixed-rate mortgages: averaged 3.12%, with an average 0.6 point, rising from last week’s 3.10% average. A year ago, 30-year rates averaged 2.67%.
• 15-year fixed-rate mortgages: averaged 2.34%, with an average 0.7 point, dropping from last week’s 2.38% average. Last year at this time, 15-year rates averaged 2.21%.
• 5-year Treasury hybrid adjustable-rate mortgages: averaged 2.45%, with an average 0.3 point, unchanged from the previous week. A year ago, 5-year ARMs averaged 2.79%.

Freddie Mac reports average commitment rates along with average fees and points to better reflect the total upfront cost of obtaining the mortgage.

Buyers have been drawn to new-home construction as existing housing inventories remain lean. Builders have struggled to ramp up construction even more due to the high demand as building materials, labor, and lot shortages loom.

However, builders say they’re building as much as they can and as quickly as they can given such challenges.

Housing starts for both single-family and multifamily homes rose 11.8% to a seasonally adjusted annual rate of 1.68 million units in November, the U.S. Department of Housing and Urban Development and U.S. Census Bureau reported on Thursday. Broken out, single-family housing starts increased 11.3% to a 1.17 million annual rate while the multifamily sector, which includes apartment buildings and condos, climbed 12.9% to an annual 506,000 pace.

“Single-family housing starts accelerated near the end of 2021 and are up 15.2% this year-to-date as demand for new construction remains strong due to lean inventory of resale housing,” says Chuck Fowke, chairman at the National Association of Home Builders. “Policymakers need to help alleviate ongoing building material supply chain bottlenecks that are preventing builders from keeping up with buyer demand.”

Single-family completions within new-home construction will increase in 2022, adds Robert Dietz, the NAHB’s chief economist. This will bring “more inventory to market despite a 19% year-over-year rise in construction material costs and longer construction times,” he says.

Regionally, new-home construction starts including both single-family and multifamily housing on a year-to-date basis (January through November of 2021) were up by the most in the Northeast, jumping 24.4% compared to the previous year. Gains followed by 19.4% in the West, 15.4% in the South, and 9.6% in the Midwest.

Permits—a gauge of future construction—climbed 3.6% in November to a 1.71 million unit annual rate. Permits are rising by the most in the West and South.

Sixty-nine percent of about 1,000 homeowners recently surveyed say they felt “house poor,” a new study from research company ConsumerAffairs shows. Homeowners blame unexpected repair, maintenance, and upkeep costs as some of the reason why.

But despite the rise in costs, nine in 10 still believe homeownership is worth it and is a good long-term option that is better than other options, the survey finds.

Purchasing a home is often the biggest financial expense most people ever make. Are some homeowners taking on more than what they can handle? Forty-three percent of respondents say their home is harder to afford than they expected.

Housing is becoming more expensive. As home prices have risen by double digits over the past year, monthly mortgage payments have increased by 3.1% whereas the median family income has risen by just 0.7% in comparison, according to the National Association of REALTORS®’ Housing Affordability Index.

“It’s not surprising that 54% of homeowners reported that house-related expenses are their most considerable financial burdens, despite their homes being their most significant asset,” the study notes. “What might be surprising, though, is that 40% indicated that their housing expenses are more than they can afford.”

Homeowners may be underestimating many costs involved in homeownership.

The Federal Reserve said on Wednesday that it plans to have multiple rate increases in 2022 and will taper its monthly asset purchases at a quicker, much more aggressive pace than analysts originally anticipated. What could this mean for mortgage rates?

CNBC reports “the days of rock-bottom rates are nearly over.”

The Fed’s benchmark short-term interest rate does not directly influence mortgage rates but it does often influence them. The Fed expects the central bank’s benchmark interest rate to increase to 0.9% in 2022, up from a prediction of 0.3% in September.

“For consumers, the writing is on the wall that interest rates are likely to start climbing in 2022,” Greg McBride, chief financial analyst at Bankrate.com, told CNBC. That likely includes long-term mortgage rates, since they are influenced by economic conditions and inflation.

The Fed said it’s moving more briskly to try to manage inflation. “We are prepared to use our tools to make sure high inflation doesn’t get entrenched,” Fed Chair Jerome Powell said in a video news conference. “This is a strong economy, one in which it’s appropriate for interest rate hikes.”

Last month, consumer prices moved higher, reaching 6.8% annually in November, prompting increased concerns over inflation.

In the housing market, mortgage rates are being closely watched since they have a big impact on home shoppers’ purchase power. The average 30-year fixed-rate mortgage has already increased to 3.24%, and LendingTree analysts now expect rates to climb near 4% by the end of 2022. National Association of REALTORS® Chief Economist Lawrence Yun has predicted that mortgage rates will average 3.5% in 2022, although that prediction was made before the Fed’s actions Wednesday.

But home shoppers shouldn’t panic: Rising mortgage rates—even approaching 4%—will still remain near historical lows, analysts say. Also, higher rates could slow the housing market somewhat, which wouldn’t necessarily be a bad thing, Jacob Channel, senior economic analyst at LendingTree, told CNBC. “Higher rates are likely to decrease demand for new housing; would-be home buyers might find themselves with a greater selection of homes to choose from in 2022,” Channel says.

More first-time buyers hope to transition from renting to owning in 2022. After a challenging 2021, many are looking ahead to the new year for an opening in the market—one where competition may not be as tight as it has been this year.

Aspiring first-time buyers are already actively looking: 40% say they’re researching home values in their target neighborhood, 34% say they’ve researched the real estate process, 30% have talked to family and friends for advice, 25% have been in contact with a real estate agent, and 15% have been preapproved for a mortgage, a new survey from realtor.com® finds.

Sixty-one percent of first-time buyers are looking for a home priced at or below $350,000, according to the realtor.com® survey. To be competitive, 34% of first-time buyers say they are checking listings every day; 25% say they’re willing to put more than 20% down; 22% say they’re willing to make an offer within 48 hours of seeing a home they want; 22% say they’re willing to go over budget. However, they are less willing than other buyers to forgo contingencies or compete in a bidding war, the survey finds.