4 of the Top Trends That Will Influence Real Estate in 2022

Dated: December 7 2021

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Trend #1: Values Continue to Rise — Albeit Not at 2020 Warp Speed

Heading into 2021, the U.S. median home price centered at $340,000 with inventory nearly 40% below December 2019 levels — making 2020 the lowest housing inventory year in recorded history. Now that eviction moratoriums are lifting and more sellers are listing, inventory is certain to shift. Still, the question remains: Will real estate values continue to climb on an upward trajectory? Most experts concur that prices will grow due to continued high buyer interest, though just how much growth the market will sustain remains to be seen. “I don’t think we’re anywhere near the end of appreciation trends,” says Joseph W. Rand, Chief Creative Officer for Howard Hanna | Rand Realty. “In most parts of the country, we’re still at or below the inflation-adjusted average sales price of the last seller’s market. If rates stay low, and the economy continues to improve, buyers have the ability to stretch to meet those higher prices.” On the other hand, Chris Suarez, co-founder of PLACE sees the amount of appreciation slowing. “This is due, not solely because the market is done absorbing the pent-up demand that came from the pandemic, but also from the looming inflation and global uncertainty related to security that has historically slowed home sales. At this point, it does not look like a huge ‘full stop’ but more like a gradual slowing, which customarily follows a fast market.” While original forecasts in December 2020 predicted housing prices would climb 8% in 2021 and 5.5% in 2022, home prices have already seen a 23% increase in 2021 — almost triple those original estimates. Moving into 2022, the CoreLogic HPI Forecast predicts home prices increasing on a year-over-year (YoY) basis by only 2.2% from August 2021 to August 2022; while, Freddie Mac projects 5.3% for the new year. Home sales, meanwhile, are ending the year on a high note. According to Zillow, pending home sales and purchase loan applications have been stronger than expected with more than 6 million sales of existing homes to close in 2021 — 7% more than 2020 and higher than the company’s former projection of 5.9 million sales.

Trend #2: Work From Home Here to Stay

An overwhelming majority (95%) of more than 100 economists and real estate experts surveyed by Zillow view an increased preference to work remotely at least part-time as here to stay. Studies have found productivity remained at least on par for company employees working from home during the pandemic compared to previous years working in-office. While Suarez sees the pandemic “as a unique moment in history — a cycle in which people will return to the office,” Vigh sees the trend only proliferating further affordable, outlying suburban and rural growth. “In other words, as long as I can get WiFi, I’m fine!” People who had previous designs on moving out of the city precipitated most of the pandemic’s “urban-to-suburban exodus,” Rand notes. “That migratory surge has mostly played out,” he says. “But for the longer term, the work-from-home trend is going to help expand the viable suburban market. People who only have to commute one or two days are more willing to add a half hour to their commute to get more house for their money.”

Trend #3: New Starts in New Construction May Stall

Consider in 2020 there were 1.38 million housing starts, and the new crop of houses expected to break ground by the end of 2021 may reach 1.56 million. But the past two years combined have witnessed supply issues and skyrocketing prices for steel, lumber and concrete, as well as new home goods such as heating units and windows. According to the National Association of Home Builders (NAHB), lumber prices alone rose by as much as 250% since 2020 and have added approximately $36,000 to new home prices. As a result, mortgage applications for new home purchases decreased 16.2% compared from a year prior, according to the Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for September 2021. And, according to the latest Census Bureau statistics, housing starts fell below expectations to 1.6% in September.

Trend #4: Rents on the Rise

If pandemic-driven home sales led real estate news in 2020, 2021’s headline will be all about how the sales market triggered an uptick in rent prices. Since January 2021, the national median rent has increased by a stunning 16.4% — particularly notable considering rent growth from January to September in the pre-pandemic years 2017-2019 averaged just 3.4%. According to Zumper, the national index for one bedrooms reached a new all-time high in every month of 2021 except for one, and two bedrooms broke the record every month since February. While rents in 2020 remained largely static, rising home prices, investor interest and a growing build-to-rent market set prices soaring in 2021. In many big cities, like Miami, Boston and New York City, where rents dropped dramatically in 2020, they’re now bouncing back, in some cases, to where they were in pre-pandemic times.

Source: Dotloop.com