Expected Real Estate Trends for 2022

Real estate trends 2022

In 2021, both the demand and price of homes went up as a result of an insufficiency of available homes on the market to meet demand.  COVID-related supply chain issues and labor shortages ultimately influenced this trend. In 2022, buyers, sellers, renters and investors can expect a potential lowering of purchase volume due to rising interest rates, but various factors could make things play out differently. In this article, we’ll elaborate on this and more.


Expect a slight return to seasonality

We can expect some return to seasonality in 2022 (more interest in Spring and Summer compared to the end of the year) due to a rise in interest rates. The Federal Reserve has made its intent to combat inflation clear, and they accomplish this by raising interest rates.

However, with a rise in interest rates comes a rise in wages, so this will improve affordability. Incomes are projected to increase by 3.3%.

Comparatively speaking, interest rates will still remain low (nothing like 18.63% average in 1981), maintaining greater accessibility for buyers and facilitating more transactions.


Broadened search parameters

With remote work and workplace flexibility becoming the norm thanks to employers seeking to retain talent and lower costs, home buyers are broadening their search and considering purchasing homes in less populated, more affordable areas. Suburbs and other markets that offer a lower price per square foot are expected to see increased popularity in 2022.

This trend will also lead to lowered affordability in such areas.


Inventory will remain low

Inventory is expected to remain low in 2022, especially when it comes to entry-level and mid-level price points. This means that 2022 is not going to see the best conditions for first time home buyers.

The major reasons sellers are not looking to sell their homes is because many refinanced their homes and are now locked into record-low rates that are below 3%.

If you are looking to sell your home in 2022, you will benefit from the rising prices and plenty of offers.


Seemingly High Foreclosures

In 2020 and 2021, moratoriums and other policies almost completely stopped foreclosures. In comparison, the amount of foreclosures and auction in 2022 will seem high, but it’ll be nothing like the housing crisis of 2008, as the economy remains strong.

Homeowners most likely to be affected are those who had difficulties paying their mortgages even before the pandemic.

The uptick in foreclosures will also likely be due to the increased attractiveness thanks to low inventory and high demand.


Stabilized Rentals

In 2021, the rental market experienced a rebound. At the beginning of the pandemic, many renters sought out more space via homeownership. The normalization of remote work also influence people to purchase homes outside of city centers.

Demand for rentals has mostly returned to major cities and suburban areas.


New Construction may begin easing demand

The construction of new homes has been behind pace for years (since the 1930’s) as a result of zoning issues and labor shortages, but COVID has exacerbated this problem by adding even more materials shortages and supply-chain issues.

Despite these factors, builders are still confident because of such high demand. Supply chain problems are going to improve, and a backlog of new construction homes will finally come to market.

This isn’t only the case with single family homes. There is a significant amount of new construction multi-family housing also in the pipeline. In October 2021, the U.S. Census Bureau reported nearly 1.5 million building permits were approved for privately owned housing unit, and many of these units are going to be built in 2022.


Strong luxury market

Businesses and stocks have seen massive gains in 2021, inspiring both American and foreign buyers to invest more in luxury real estate. Since these buyers are not impacted as much by rising interest rates, prices for luxury properties will most likely continue to rise in 2022.


Increase in iBuyers

The digitization of the real estate industry has been well underway even before the pandemic. This trend is only going to continue with virtual tours and iBuying becoming increasingly commonplace. However, the guidance that real estate agents can provide in such a complex market will remain pertinent to home buying and selling moving forward.

Digital options for closings and home visits will adapt to meet the demand for Generation Z and Millennial buyers. Staying up-to-par with evolving industry trends is a top priority for modern real estate professionals.


In Conclusion

Although we can make informed estimates as to what the 2022 housing market may have in store, the future remains volatile and unpredictable. Regardless of the playing field, there is always opportunity for those with the eyes to see.

If you need guidance when it comes to buying or selling a home on Fire Island, NY, the Luxury Fire Island Homes team would be more than happy to discuss your goals and help you best navigate the 2022 real estate market.