If you are a real estate market investor, then you understand the importance of remaining up-to-date on housing market trends both nationally and within your local communities. Let’s take a look at a current trend as well as a potential movement for the future.
It’s critical to look at real estate trends through all lenses. To start, we’ll take a look at the home selling forecast for 2022.
Over the last few years, investors and potential homebuyers alike have gotten accustomed to low mortgage rates – rates that were kept low to help encourage people to invest in a rocky real estate market. However, as the national housing market has shown considerable progress toward recovery, these interest rates are rising, which is affecting pending home sales – but only slightly.
According to the National Association of Realtors, pending home sales declined slightly from May to June of this year because of higher mortgage rates. However, pending sales were still up 10.9% from 2012.
Although some potential homebuyers are backing out of pending deals due to floating mortgage rates, overall pending home sales are rising despite higher interest rates. This trend will more than likely continue throughout the foreseeable future as the housing market continues to make progress toward “normal.”
Experts believe the return of foreclosure activity will potentially add more existing homes to the real estate market. Due to the limited number of foreclosures in the last two years, primarily due to policies and moratoriums bringing them to a halt, it’s nearly inevitable for this number to increase into the new year.
Individual buyers who might not have had an interest in foreclosure sales and auctions might change their minds with the continued limited inventory.
In order to look at real estate market trends through all lenses, we’ll also look further into the home buying forecast for 2022.
In 2021 the price growth was at 13.6%. In 2022, rapid price growth is predicted, although not slightly slower than last year. We’ll continue seeing more traditional real estate market patterns arise, including:
We can expect to see rapid price growth with the continued lacking supply of homes on the market. First-time homebuyers will have an especially difficult time finding homes at the entry- and mid-level price points into 2022.
Buyers are competing for a limited supply on the market due to slow movement in housing construction and a lack of incentive for sellers.
Lastly, we’ll also look into the home renting forecast in terms of real estate trends to look forward to in 2022.
The pandemic caused many renters to seek out homeownership as an answer to more space needed from spending more time at home. Since last year, rental demand has returned again to major cities and is on the rise in more suburban regions too.
While rent prices are on the rise, it’s unlikely we’ll see the significant jumps we saw in the last year of up to 15% in certain areas.
One of the potential upcoming trends for the future – especially for big cities with limited space – is the increase of mini-apartments. Over the last few years, Americans have been downsizing and will more than likely continue to do so in the near future. Plus, with the digital society that we currently live in, the needed space is limited – everything from books and movies can be kept on handheld devices and “in the cloud.”
These mini-apartments are incredibly popular in Europe and will more than likely increase in popularity in U.S. cities in the near future. In fact, cities like Seattle and Manhattan already have mini-apartments, which have proven to be rather attractive for Millennials.
In 2021 there were record-breaking mortgage interest rates lower than we’ve seen in a very long time. Not surprisingly, these rates could not last forever. In 2022, we’re expecting to watch these rates rise once again.
According to Freddie Mac’s Quarterly Forecast, mortgage rates are anticipated to rise through the end of 2022. Ultimately, these increases will impact affordability, raising monthly homeownership costs all around.
Don’t forget – home appreciation rates are not a guarantee. Thankfully, the current trends of the economy show that home appreciation rates are looking good into 2022.
Year-over-year, we’re currently looking at a 19% increase ranging across all home price ranges, including:
Regionally, though, home appreciation rates may vary slightly. We’re noticing that home appreciation rates are the strongest in the West.
Ultimately, the growth of housing prices is determined by the balance between supply and demand. The expectation of increasing home appreciation rates in 2022 will be a result of high demand matched with limited supply.
In 2022, both economic experts Freddie Mac and Fannie Mae anticipate slightly over 5% home appreciation rates.
The real estate market trends of 2022 will likely look similar to 2021, but not at such aggressive rates. There will be continued growth in 2022, but not at the level we saw in 2021. For now, the market will continue to be slightly swayed towards sellers as a result of the limited supply on the market and projected buyer demand.
The year is young, though, and the real estate trends of 2022 can change at any time. Obviously, current events occurring across the globe have a direct impact on the economy and real estate market trends. So, as things arise in the upcoming year we might see shifts in the predictions.
In short, pending home sales and the development of mini-apartments will likely continue to increase throughout the near future. Keep an eye on these two trends, especially if you are a real estate investor.
Matthew is the CEO of Evernest. He is a student of the book Good to Great and is passionate about building the best property management company on the planet (and maybe even the universe if Elon Musk will hurry up). You can usually find Matthew at the baseball field with his son, at a dance recital with his daughter, or at his favorite restaurant with his wife, when he’s not in the office. And if you can’t find him in any of those places, it probably means he’s traveling.