The past year has certainly been one to remember for anyone involved in the real estate industry. Whether COVID-19 frustrated plans or generated new opportunities to be more geographically flexible, 2022 will continue to present a dynamic environment for buyers, sellers, and investors alike. Here is a closer look at some important trends that will shape the year ahead.
Increased Transactional Activity
Housing market studies project that the collective national home sales growth we saw throughout 2021 will continue into 2022—where it is expected to increase by 6.6%. A main driver of this trend is the fact that nearly 45 million millennials are entering their ideal first-time home buying ages ranging from 26 to 35. A rebounding economy and falling unemployment has spurred an increase in the average U.S. income by 3.3%, sustaining high sales activity regardless of steadily escalating mortgage interest rates. In the majority of major markets, it is predicted that home sales will increase significantly—with current models indicating that 2022 will net the second highest sales level in the past 15 years.
Home Prices Continuing to Rise
Listing prices for properties are continuing to ramp up—and that trend doesn’t seem to be going anywhere soon. The uptick in home prices, which first started in 2012, had previously been a gradual creep upwards. That changed dramatically in 2020. The pandemic set off an exponential price hike across the country. A decade’s long shortage in available inventory resulted in the market falling 5.2 million single-family homes short of existing demand levels. As developers scrambled to add new homes to the market, the market dynamics accommodated the high demand and low supply by driving up prices. The good news is that although home sales prices are expected to increase even more in 2022, it will be at a much more moderate pace—just 2.9% by the end of the year. Concerns over affordability will help stabilize price escalation even while continued supply-demand disproportionality remains.
Rents Overtake Home Price Growth
Similar to home values, rents increased slower than average in the initial stages of the pandemic. In major metro areas with remote working potential, rent prices stalled as tenants sought out secondary markets. In these areas, rents escalated quickly as teleworkers leveraged their employment flexibility to move to the suburbs in search of more bang for their buck when it came to square footage and amenities. With home values pricing out many would-be homebuyers, there was a nationwide increase in the demand for rental properties, resulting in only 5.7% to 6.8% of rental housing units remaining vacant compared to over 10% the year prior. Rents are anticipated to increase on average by 7.1% this year, marginally higher than the projected home price hike.
Suburbs Remain Enticing
The unprecedented changes in daily life prompted by the pandemic had the follow-on effect of shifting buyer and renter preferences, with the focal point less tied to geographic location and more towards more livable space and enhanced versatility. The practical effect was that home-seekers focused their property searches in the suburbs—a trend that is likely to continue into 2022. Although vaccinations and loosened quarantine protocol have led to a rebound for many urban markets, the space and lower cost of living offered by the suburbs will continue to draw customers, especially as inflation grows and remote working options remain highly available.
Funding Matters
If there is one constant in the real estate industry, it’s the importance of reliable financing. Nothing happens in the market without capital and having a private lender that you can trust for insight, efficient service and intuitive solutions is an essential component for successful real estate investing. The experts at Rehab Warehouse Inc. leverage their experience and private lending industry knowledge to provide you with the money you need when you need it. Contact us today to learn more about how we can help you accomplish all of your investment goals.