2020 and 2021 have been very unpredictable for almost everyone in the real estate industry. When the pandemic started in early 2020, everyone in the industry didn't know what to expect in the next couple of months since we all didn't know how long these uncertain times would last. The demand for homes went down in the early days of the pandemic (February to May) but later spiked towards the end of 2020.
As we start off 2022, there are several things that you need to take note of if you want to thrive in this dynamic industry. Whether you are an investor in real estate, a broker, hedge fund, or an individual trying to buy a home, the expected trends we are about to share with you will make your life much easier in 2022.
Let's dive in!
1. A general increase in home sales and prices
In 2022, we expect a general increase in the number of homes sold and their respective prices. According to Danielle Hale, Realtor.com chief economist, there is an expected 6.6% increase in home sales in 2022 compared to 2021. Hale went on to predict a 2.9% increase in prices.
These two increments will mainly be due to the increase in the demand for homes, especially the millennials, who are usually first-time home buyers. This growth in demand will likely lead to a relative increment in the mortgage rates. However, according to Hale, the expected 7.1% increase in rent prices will be a motivation for first-time homebuyers to continue pursuing their dream of buying their own homes.
2. The housing shortage will continue in 2022
The pandemic heavily affected the real estate industry's production, which led to a slowdown in the number of houses constructed per month. As people were forced to stay indoors, construction companies could not maintain the same production level since they had less workforce on the ground and a limited supply of building materials and equipment.
However, as the world is slowly getting back to normal, the demand for housing has spiked. This increase has led to a record shortage in the last two years compared to before COVID19. According to a report by CNBC, the number of homes actively listed for sale fell to a record low in November 2021.
A similar trend is expected to continue in 2022 since demand is still way above the production in the housing industry. According to research by Zillow, the gap between demand and supply shrunk in 2021 and is expected to further shrink in 2022. However, it is unlikely that supply will meet the demand in 2022.
3. Interest rates will affect mortgage rates
The Federal Reserve in the US is expected to raise interest rates in 2022 to fight inflation in the country. This will lead to a corresponding increase in the mortgage rates. Experts from Realtor.com and Redfin expect a 30-years fixed mortgage rate to reach 3.6% by the end of the year (2022) compared to the average of 3.3% last year.
The increase in the mortgage rates will likely discourage many speculative home buyers, which is good news to those who want to buy houses to own and first-time home buyers.
4. Demand will remain strong nationally throughout 2022
According to Carlo Siracusa, president of Weichert Residential, demand for homes in 2022 will remain solid. This demand will mainly be driven by higher wages, gradually improving employment terms, and rising stock market values. Carlo also expects the industry to move close to equilibrium in 2022 compared to 2021.
The impact of the working-from-home trend that most companies adopted thanks to the pandemic is yet to be determined. However, if more people continue to work from home, there will likely be demand in places where people want to live and not those closer to their employer.
5. Technology will be a requirement to do business in real estate
Prior to the pandemic, using technology was seen as "nice to have" by most real estate agents. In 2022, we expect an increase in the use of technology in the entire home-buying process. Both buyers are expected to use the digital tool right from listing, interacting with agents, and finally closing deals.
Home listing apps and websites are also expected to integrate more sophisticated technologies into their platforms to make the process of viewing and interacting (between buyers and sellers) more seamless.
6. Home construction will continue to grow at a strong pace
As home demand continues to supersede supply in the early days of 2022, we expect construction companies to ramp up the pace of construction further. However, these companies will continue to deal with supply chain challenges that have been going on for the past 12 to 18 months.
This means construction companies that will deal with these challenges will have a slight edge over their competition. Insufficient lumber production, higher lumber tariffs, and delayed deliveries for almost all kinds of construction materials will continue to be a challenge to builders in 2022.
7. Home prices will rise but at a slower rate than 2021
Most experts expect home prices to continue going up just like it has been year-over-year. However, the rate of increment is what is expected to go down when compared to 2021. Supply is also expected to be better than in 2021, which will eventually slow down the rate of increase for home prices. oHwHo
Final thoughts
The general consensus amongst most industry experts is that prices of homes will go up just as it has been in previous years. However, the housing market is expected to be more stable than it has been in the last two years. As construction companies continue to ramp up the supply of homes, the rate of increment in housing prices will also likely go down compared to 2021.
Supply and delivery of construction materials will be crucial in determining the supply of homes in 2022. Companies that will overcome the current supply chain challenges will likely do better than their competition.
Please note; These dynamics can always change within the year. That is why we recommend using professionals like us to help you sell or find a home to buy. Our team is always updated about the real-time market condition, so we will surely help you get the best deal, whether you are selling your current home or trying to buy one.
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