8 Hopeful Predictions for the Housing Market

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Mindful of the old saying that the only things you can predict are death and taxes, we’re going to try our luck and try and predict what will happen with the housing market over the coming year. With inflation and interest rates rising and conflict in Ukraine, there is a lot of uncertainty around, so take this post lightly and don’t bet the farm on anything we’re suggesting!

We don’t believe the housing market activity will reach historic highs, but economists expect it to remain buoyant. Over the coming year, we anticipate that the strong seller’s market will continue, the Sun Belt will remain the most sought-after region, and flexible work options will continue influencing home purchase decision-making.

Getting your finances in order is an important part of the process but there there are several apps available to help investors and homebuyers manage their finances prior to buying. One of our favorites is the one offered by M1.

This article will explore 2022’s most talked-about housing market predictions. Considering the opinions of real estate experts, here are some predictions regarding the future of the US housing market. 

Predictions for the Housing Market

There will be no crash, and there is a very high probability that housing market conditions will remain robust through 2022. Many trends that elevated real estate to historic heights last year are likely to continue. 

1) Low-Interest Rate Environment Will Not Endure

A low-interest-rate environment makes housing more affordable, pushing home prices higher as more buyers compete for the same limited supply. 

Real estate investors also benefit from low-interest rates; more investors purchase houses intending to rent, reducing the available housing stock. The two buyer types, homeowners and investors, compete over ever-reducing housing stocks, pushing up prices.

As the rates increase, there may be a reduction in purchases in suburbs, exurbs, and even rural areas. People may discover that they can live in more affordable regions while working remotely. We may, however, continue to witness an inventory increase in expensive metropolises, such as San Francisco, Los Angeles, and New York. 

More people will likely remain in their homes as interest rates rise, which may affect the availability of housing. More foreclosures are also likely.

2) More Renters

The number of renters increased even before the pandemic. Due to the large number of millennials reaching adulthood, there was record household growth. The Great Recession left 72 million young people with less disposable income and purchasing power than previous generations.

Furthermore, the baby boomer generation was a top-growing group of renters during the 2010s. People are selling their houses in retirement to live off rent and equity instead, and it is possible they cannot recover from the Great Recession and forcing them to rent. It’s also likely that homeowners will consider using Airbnb to supplement their income.

Almost no homeowner will escape the economic impact of COVID today. Mortgage payments may not be made by everyone when the forbearance period ends. If they can’t sell, they will likely become delinquent and face foreclosure, leading to renters becoming homeowners.  

Among this group of renters, affordable rentals are likely to be sought, a category that is already scarce. Affordable homes will not make builders money. Rental rates could continue to rise through 2021 and beyond, creating investment opportunities.

3) The Price of Homes Will Continue To Be Strong

Even though we’re in a recession, most markets are seeing high home prices. Why?

It’s all about supply and demand. People are moving out of cities, apartments, and condos due to COVID. Short-term rentals and rising building costs are contributing to low supply. 

It takes time to fix the supply shortage. Building a subdivision can take years. Subdivisions are not always easy to make because of things like sewer and water access. Also, the Great Recession dried up financing for these projects. 

There is no sign of waning demand. Families are just starting to form, and millennials are just beginning to buy houses. Then there’s Gen Z, who are graduating college and aren’t excited about moving back in with their parents. Baby boomers are aging. US populations are growing. Ten years ago, there were 25 million fewer Americans than today. They need homes.

 Eventually, interest rates will rise further, and there won’t be many people moving to a new home and taking on higher interest rates when that occurs. As a result, supply will decrease. 

Experts predict continued price growth due to low inventories and low-interest rates. It was the craziest economic cycle in history as they shot up 12-15% in 2021.

4) A Potential Rise in the Number of Buyers 

IBuyers are companies that purchase and own homes. iBuyers buy houses at a discount, repair them, and then resell them to the general public for a profit. 

iBuyers makes home buying and selling easy. Because they have a lot of cash, they can streamline processes and close more quickly. This sector is expected to grow over the years, as significant international capital is pouring into these companies.

5) The Housing Market Will Be Affected By Political Uncertainty

The presidential election year was an intense period, leaving consumers feeling uncertain and fearful. Additionally, those who were disappointed in the election results can now relax knowing Congress has been split. Wall Street enjoys gridlock in Washington since it guarantees little change. 

Even though some people are afraid of tax and regulation changes, it is unlikely that these worst-case scenarios will ever be played out.

The impact of political events outside the US, such as Russia’s invasion of Ukraine, is likely to affect the housing market in ways that can’t be predicted easily.  

6) Millennials and Gen Zers Are More Likely To Buy a Second Home

As remote work becomes increasingly popular, Americans are moving into larger homes in more affordable markets, but many do not wish to commit to relocating permanently. For young people who are drawn to the amenities of an apartment living in a city, where expensive housing makes homeownership less feasible, this is often the case.

It is likely that, as a result of these factors, more people will purchase what is traditionally considered a second home, either as a temporary residence or as a rental property, before purchasing a primary residence.

In part due to the popularity of applications like Zillow, young people are becoming savvy observers of the housing market. The idea of purchasing a second home is a good way to break into the market while mortgage rates are low and build equity, perhaps with the assistance of family or friends to ease the financial burden. Nowadays, virtual shopping tools, and 3D Home® tours, facilitate the process of finding a home in a distant location.

7) The Renovation Boom Shows No Signs of Slowing

Most buyers have made one or more compromises (81%) while trying to purchase a home in today’s hypercompetitive market. In an era of rising house prices and mortgage rates, many homeowners are expected to upgrade their existing homes rather than enter the market again to purchase new properties.

According to a survey, three-quarters of homeowners will consider home improvements this year.

8) The Number of Agents in the Industry Will Continue to Decline 

The demand for real estate agents is likely to see a downward trend as the world moves a step further toward the virtual landscape. iBuyers and other online services are likely to create more space for themselves and there is likely to be a proportionate decrease in the number of agents. 

Overall, investing in real estate looks good. If you understand when to buy and where to buy, you can find plenty of good opportunities to buy rental properties that will help cash flow and offer equity growth.

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.