According to Danielle Hale, the chief economist for Realtor.com, the 2022 housing market will experience a “whirlwind”. Home sales are expected to increase to the tune of 6.6%. Home prices will also rise by about 2.9% piggybacking off 2021.
There is also expected to be a slight uptick in mortgage rates, after a consistent decline. Reasons for this can range from housing stock issues, supply chain delays, as well as the lingering pandemic. This will make affordability a top concern for buyers, specifically the now 45 million Millennials aged 26 to 35. Bob Pinnegar, CEO and President National Apartment Association thinks this will dominate the real estate market in 2022.
Now that’s a lot of information to unpack and it can be dizzying to see the real estate marketing climbing so high. So, we’ve broken down the most relevant emerging trends in real estate 2022 for prospective buyers. Read on to find out.
1. The Era of the Digital House Tour is Here
You can buy nearly everything else online, so why not houses? The iBuyer is here to stay for everything from grocery shopping to virtual tourism. And so, real estate is now imbibing the digital marketing juices as well.
It’s not just because people are warming up to technology, but also because it’s a convenience made prominent by the pandemic. With the effects of the COVID-19 pandemic still lingering, people just find it more convenient to look at something in-house. The uptick began in 2020 when the coronavirus pandemic was in full swing. However, its effects have continued long after.
The widespread use of VR for things like gaming and virtual entertainment has also afforded the real estate market to adapt. 3D tours and drone videos as well as virtual staging all help clients make decisions.
While many buyers still won’t buy just going off virtual tours, they’re a much more helpful visual aid than photos. Photos on a real estate website are often viewed with suspicion to give the buyer an idealized view. With 3D tours and virtual tours, at least the 360-degree view provides perspective.
It’s not only house tours though. According to online surveys, consumers are actively looking for better mortgages online. This presents a true shift to the internet to look for practical options to finance mortgages rather than just “window shopping”.
That way, perhaps clients can narrow their search and their preferences. This is one of the most transformative real estate market trends of the 21st century. A house is one of the biggest purchases of a person’s life. If that can go digital, then everything else will follow.
2. People are Moving to the Sun Belt
There is a marked shift in the real estate market of people shifting to the suburbs. This trend has been blamed on the pandemic, but the numbers show that San Francisco, New York, and DC are experiencing a lull in sales. This may be reversed once the pandemic’s effects are gone, but it can persist for 3-5 years.
However, the shift to suburbs for homes has highlighted another trend. Americans are moving to the Sun Belt. The South of the United States has become a hotbed for population growth. 75% of the population in the country is growing there. While it appeals to the retirement age community, it’s become an attractive area for young professionals. The wide-open spaces have a certain allure, and not just for single-family houses, but for multi-family homes.
The largest center for growth is expected to be Austin. Phoenix and Nashville are close behind.
3. There is a Rising Demand for Single-Family Homes
There has been such a great demand for suburban single-family homes in the US that it’s creating a shortage. According to US Census Bureau, single-family home demand has crossed the historical average after experiencing a decline during the pandemic. In comparison, the demand for muti-family homes is steadily declining and is hovering around the historical average.
This has resulted in a huge increase in total home sales. Realtors projected that home sales would rise 10% in 2021. This brought them to the historic highs of 2006. Also, searches for a single-family home reached a four-year zenith in 2020, according to the chief economist for Redfin.
The reasons for this increase have been analyzed by PwC. Their report breaks it down to 3 factors:
- Low Interest Rates
- Strong Pre-Pandemic Housing Trends
- Importance of Homes made eminent by Quarantines, Social Distancing, and Networking
The pandemic saw people being laid off, and not being able to afford rent for many months. This underscored the importance of having one’s own home. As a result, the single-family housing inventory has reached a 40-year low. The average time that a home was listed also went down by 18% to 54 days from September 2019. This is one of the most important emerging trends in real estate 2022. It will define housing prices for the next decade, and for the next generation (Gen Z).
4. Mortgage Rates are Rising
There are some 830,000 homes available to buy in the United States right now. This tight inventory has resulted in a reversal of the declining mortgage rate trend. In January of 2021, the mortgage rates had hit a record low of 2.65%. This resulted in a spike of mortgage applications which reached a 10-month high in 2021. The Federal Reserve also elected to keep interest rates near zero in January 2021. All this fueled an application frenzy. However, the trends didn’t last.
In December 2021, the average 30-year fixed rate mortgage was 3.11%. By February of 2022, that number had risen to 3.92%. This could slow down the housing market in the long run, but right now the momentum isn’t pausing.
That’s because mortgage rates are “still below the historic norm”, according to Devyn Bachman, VP of Research at John Burns Consulting. The spring buying trend is causing a frenzy in the real estate market, and it’s frustrating. However, due to lower overall mortgage rates, there is optimism and a rush to buy. Coming off the heels of a pandemic, and understanding the importance of a home, Millennials prefer to own, not rent.
5. The Rental Property Market is Declining
As expected, with more people looking to buy rather than rent, the rental market is declining. This one of the largest emerging trends in real estate 2022. Demand for rental properties was already declining in 2020 due to the pandemic, but the effects have ballooned. Young professionals opting to work from home have given up apartments to move back with their parents.
Pew Research shows that the majority of young adults aged 18-29 are living with their parents. This is the first time since the Great Depression of the 30s that this is happening. The highest apartment vacancy rate since 2010 is the result. Also, declining rental prices show a great opportunity for those looking to live on less.
Commercial rentals are also declining. Investors can take advantage of commercial properties which went vacant in 2020 like retail buildings and repurpose them into housing units if affordable.
As it stands, the effects of the pandemic and low interest and mortgage rates have made 2022 a great year for real estate. Buying homes, renting homes, and investing in real estate looks extremely lucrative. It’s not just for those that want to invest in real estate, but for those that want to buy homes. It seems like the perfect time to lay down roots in a city and build.
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