Since the commencement of the COVID pandemic, the real estate market has been nothing short of a roller coaster for both buyers and sellers.
Record price increases, ultra-low mortgage rates, and fierce buyer competition have prevailed in the housing market over the last two years.
The experts say that the good news is that 2022 may finally put the sector back into balance; however, it may not be back to pre-pandemic normal. Keep an eye out for these vital trends if you plan to purchase or sell a house this year.
Housing Market Trends
One of the major underlying drivers of these trends is a shift from big cities to the suburbs, which began far before 2020. However, the COVID-19 pandemic has hastened this process.
Nevertheless, there are many other significant trends in the real estate industry to watch over the coming months.
Let’s check out the key trends.
1) House Hunting Goes Digital
The pandemic has hastened digitization in all industries. The housing market is no different. Because of the pandemic and the competitive property market in 2020, some customers bought their homes without seeing them.
Because of virtual capabilities, many people could take a virtual tour of the property, and make buying decisions without even setting foot in the property beforehand. These virtual capabilities include:
- 3D Tours
- Drone videos
- Virtual staging
Online searches for “virtual staging,” which had been rising before the pandemic, spiked in 2020. However, demand can drop slightly after the outbreak.
Millennials, known for their social media usage, use technology to understand more about their new neighborhoods. Residents of a specific area can use websites like
Nextdoor to stay connected with other residents and catch pace with neighborhood events.
2) Relocation from Cities to Suburbs
The COVID-19 pandemic has driven suburban migration from large cities. For the next 3-5 years, the trend of people opting not to live in big cities may continue. The shift is driven by two factors: need and choice.
Those who can no longer afford to stay are forced to relocate. While the wealthy are relocating by choice. People who lost their jobs during the pandemic and were unable to pay the high prices of living in major cities to seek more cheap housing options.
Last, lower taxes and lower housing and rent prices make the suburbs an appealing destination.
3) Overwhelming Demand for Single-Family Housing
Several reasons are driving demand for single-family houses, including:
- As people shift from cities to the suburbs, the demand for single-family houses is growing.
- Quarantine, social separation, and telework have increased demands for houses.
- Pre-pandemic housing patterns were strong.
Another concurrent development is millennials entering the homeownership phase. It adds to the pandemic-related demand for housing.
Millennials’ eagerness to buy their first home or start a family has fueled suburban development. Hence, the supply of single-family homes is at its lowest level in nearly 40 years.
4) Real Estate Price Will Continue to Rise
Current real estate trends are intricately linked. Prices for single-family homes climbed in 2020 as a result of growing demand and dwindling supply and are likely to stay high in 2022 and beyond.
While there has been ongoing chatter about a housing market crash, the property market did momentarily reverse course after the pandemic began, as prices fell and individuals considering selling their homes reconsidered their decision.
However, after a few months, prices began to rise again. In 2021, the seller’s market was strong. However, home purchasers were not deterred by high prices.
Some home buyers are willing to pay more than the asking amount to secure their purchases. Current homeowners’ home equity has gone up with rising house prices.
5) Mortgage Rates Drop
In 2020, record-low mortgage rates encouraged people to buy homes. Mortgage rates reached a 50-year low in 2020, according to some estimates.
It resulted in a surge in mortgage applications, which peaked at a 10-month high in early 2021. In the first half of 2020, a surge in mortgage refinancing coincided with a surge in online mortgage rate searches. In January 2021, refinancing activity was 93% more than in January 2020.
6) Rental Property Market Declines
The rental market for commercial and residential properties in big cities declined in 2020. It was partly due to a transfer of people from cities to suburbs.
Demand for rental houses will continue to shrink in major cities as those who can afford it will look at buying a home. Those who can’t find other ways to save money or fall behind on their rent hunt for other options.
Last year, the number of young professionals who gave up their residences and returned to live with their parents increased. According to Pew Research, the majority of young adults aged 18 to 29 have lived with their parents for the first time since the Great Depression.
The highest apartment occupancy rate since 2010 and falling rental rates have resulted from the migration from big cities.
While rental vacancies are increasing in larger cities, demand for rental properties is increasing in mid-size and smaller cities across the country as demand for houses outpaces availability.
The rental market’s slump has created real estate investment opportunities. Investors can now purchase distressed rental properties in big cities, anticipating a return of renters after the pandemic is ended.
Commercial structures that were unoccupied in 2020, such as retail buildings and hotels, can also be repurposed into housing units by investors.
Single-family housing costs are projected to remain high and supply-constrained as more individuals move to the suburbs and desire to buy a home. Low mortgage rates will continue to stimulate demand for housing.
Meanwhile, the rental property market in major cities will continue to decrease, creating opportunities for real estate investors anticipating a post-pandemic resurgence of city life.
Housing Market Trends Final Word
An increase in mortgage and a substantial rise in house supply as construction catches up with demand are signs of their reversal. Hence, it will be interesting to observe which trends were only transient because of COVID-19. Or are they genuine long-term trends that are likely to last?
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Disclosure: The author is not a licensed or registered investment adviser or broker/dealer. They are not providing you with individual investment advice. Please consult with a licensed investment professional before you invest your money.
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Tim Thomas has investments in real estate.
This post was produced and syndicated by Tim Thomas / Timothy Thomas Limited.
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