Property investment represents a significant part of people’s wealth, and it is especially true for several property owners in the United States. According to the Federal Reserve’s Survey of Consumer Finances, 64.9% of American families own a primary residence. The scale and size of the housing market make it an appealing and lucrative sector for many investors.
However, the housing market is constantly changing, and housing market trends come and go. Given that the housing sector is highly localized, with varying conditions in every state, city, and metro area, you cannot expect things to stay the same.
Fortunately, knowing the market’s fundamentals can help you remain on top of these changes. Hence this article shall discuss the most up-to-date housing market trends, which every real estate investor should follow.
5 Key Trends that Real Investors Should Follow
Real estate, like all other markets, goes through cycles. While none of us can predict the market, many real estate analysts anticipate that the housing market will continue to grow, albeit at a slower rate.
Here are five top housing market trends for 2022 and beyond that real estate investors need to follow.
Mortgage Rates Remain Steady
Low mortgage interest rates are one of the reasons for the housing market’s robust performance. By the end of 2022, mortgage interest rates can increase slightly from their present level of 3.5%. However, according to experts, mortgage rates are unlikely to change rapidly or drastically.
Despite the Federal Reserve’s announcement that it will begin to trim its purchases of mortgage securities, interest rates are unlikely to increase sharply in the current economic environment. Even if the 30-year fixed-rate mortgage rate increase to between 3.75% and 4.25% by the end of 2022, interest rates will remain low.
Home Prices Will Continue Rising
According to the Federal Reserve, the median house sales price has increased by nearly 33% in the last five years. There is still a greater demand for homes than there is supply, particularly among real estate investors and people searching for larger suburban houses now that working from home is becoming more common.
Property prices will continue to rise at an accelerated rate, albeit slowly. Buyers’ purchasing power will sustain because of economic growth, with median home sales prices likely to increase by 2.9% in 2022.
According to Realtor.com’s Monthly Housing Market Trends Report:
- Over the previous year, the number of active listings fell by 26.0%.
- The total number of homes unsold homes fell by 16.2%.
- Even though the number of newly listed houses on the market is down 0.7% year-on-year, sellers continue to do so at lower rates than in past years.
- The median listing price for active listings was $379,000, up 8.6% from the previous year and 22.4 % from 2019.
Housing Supply Deficit is Increasing
According to the U.S. Census Bureau’s survey, 2021, housing starts, housing completions, and building permits are steadily increasing over the last five years.
According to Freddie Mac (Federal Home Loan Mortgage Corporation), the availability of new and existing houses for sale in the United States is at an all-time low. The shortage of entry-level, single-family homes that first-time buyers can afford is the driving factor of the housing crisis. In 2019, only 7% of new homes were entry-level, compared to 40% in 1980.
Freddie Mac does not foresee housing demand to decline in the immediate future for several reasons – the significant number of millennials entering the property market and the amalgamation of low supply and high demand.
Realtor Magazine anticipates a 6.6% increase in housing availability, possibly leading to fewer multiple offers and a slower rise in home prices. Although more homes are on the market, sellers will have the upper hand. According to RISMedia’s 2022 Real Estate Market Forecast, buyer competition will remain high even as more sellers enter the market, resulting in another whirlwind year of house buying in 2022.
Shifting of the Rental Market
Tenants now have more housing options as more individuals work from home. More tenants are looking for places with larger, more affordable residences.
While rents in expensive cities continue to rise, small and mid-sized cities are seeing a surge in demand, with vacant properties going on rent within days of being listed and rates in some small-sized cities increasing by double digits.
According to Apartmentguide, rent costs will be double digits year-on-year across the country and will stay that way for two years. Rent inflation will reach nearly 7% by 2023, the highest in more than 30 years.
Meanwhile, housing prices are outpacing incomes, with the price-to-rent ratio at its highest level since 2006.The price-to-rent ratio indicates the demand for rental property, and a high price-to-rent means high demand for rental properties.
According to Forbes, landlords have become tech-savvy, and every aspect of their rental property business is tech-based. To improve the tenant experience and increase profitability, companies are turning to
- Electronic document signers
- Online tenant applications
- Online rent collecting systems
- Accounting software.
Because of Covid-19 prospective tenants are conducting more online searches and viewing fewer properties. Renters are more interested in listings that feature videos, floor plans, and 3D tours.
Increasing Foreclosure Activity
According to a new report from ATTOM data solutions, foreclosure activity is rising. Although residential foreclosures were down last year owing to lockouts and moratoriums, foreclosure filings are up:
- Default notifications, scheduled auctions, and bank repossessions increased by 5% in October 2021.
- Lender repossessions have been rising since October 2021.
- Florida, Illinois, and New Jersey have the highest foreclosure rates.
- St. Louis, Miami, Trenton, Cleveland, and Chicago are the major metro regions with the highest foreclosure rates.
- Pennsylvania, New Jersey, North Carolina, Massachusetts, and Connecticut are the states with the highest monthly rise in foreclosures.
It’s no secret that the housing market experienced significant changes as the year progressed. Home prices and buyers’ demands are rising, and mortgage rates are declining. Real estate follows a cyclical pattern. There are booms and busts, and some of these peaks and valleys can be rather severe.
As a real estate investor, it’s critical to keep up with the current developments to know how to proceed—understanding where the economy is moving, what trends are evolving, and how you can maximize your investment.
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.
Featured image credit: Unsplash.