The pandemic has spurred a lot of changes across the world. Whether it was with how people work, shop, eat out, socialize, or how many businesses and markets run now a days there has been a huge shift due to the impact of the pandemic. This is no different than the impact it made with the real estate market. It has ignited a home-buying frenzy as the decade-long housing shortage converged with historically-low mortgage rates, shifting workplace dynamics and new opportunities for young buyers to pursue their first homes.
As we come to the end of 2021, here’s a look at the expectations of real estate experts for 2022:
- Another Whirlwind Market: Home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs. A gradual uptick in mortgage rates will make affordability a top consideration for home buyers, especially the 45 million Millennials aged 26 to 35 who are at prime first-time home buyer age. Demand from these young households will keep the market competitive and fast-paced despite a small uptick in housing inventory as builders continue to ramp up production, increasing single-family starts by 5% in 2022.
- Affordability Challenges: This will come from rising prices and mortgage rates. However, rising rents- which are projected to increase 7.1%- will be a strong motivator for many hopeful first-time buyers. On top of this, all home shoppers will have some advantages that stem from a competitive jobs market. It is also projected that incomes are to increase by 3.3% and with many employers looking to attract and retain talent without impacting costs, we expect workplace flexibility will continue.
- Renters Market: Housing affordability will remain a key issue as the nation’s rental housing market tries to stabilize from lingering pandemic and housing stock issues. Supply chain delays and continued inflation will also impact every facet of the industry, from property managers to renters to owners. You’ll also see increased regulatory efforts directed at the rental housing market after a tumultuous time during the pandemic. Though highly disputed by economists nationwide, rent control policies are gaining steam and will continue to be pushed as a quick solution under the guise of preserving affordable housing.
- Single Family Homes: Demand for apartment and single-family homes continues to outpace supply, which ultimately drives competition and hurts housing affordability. Attention throughout the industry and at all levels of government will be focused on remedies to provide quality and affordable housing.
- Industry Regulations: industry regulations are also being examined, fueled by the expiration of pandemic-induced eviction moratoria. These policies must be watched closely, as they achieve the opposite of the intended effect, driving up housing costs as available housing units leave the market and competition increases.
- Mortgage Rates Increasing: Expect 30-year-fixed mortgage rates to slowly rise from around 3% to around 3.6 by the end of the year, mostly attributed to the pandemic subsiding and inflation continuing to linger. By late fall, high mortgage rates, paired with already high housing prices, will likely slow annual price growth to roughly 3%. This low price growth will likely discourage speculators from entering the market, giving first-time home buyers a better chance at securing a home.
- Climate Change:Home buyers will start considering climate change as a major factor in their home-buying decisions, as natural disasters and extreme weather events continue to increase in frequency. Home sellers will also likely make significant investments in climate-change resilient home features in order to appeal to climate-conscious home buyers.
With so many unusual trends occurring in the housing market, it begs the question of what will happen with real estate in 2022. Will markets continue to be on fire? Will the pandemic continue to fuel low interest rates? Perhaps most importantly, what can you expect next year’s dominating real estate trends to be?
An experienced local real estate agent, like Carlos G, can be your best option to achieve a desirable outcome. San Diego agents are familiar with local market conditions and can provide guidance on pricing your home and making repairs without spending more than you need to.