Residential Real Estate Market – What to Expect Next?
The housing sector has demonstrated resilience since the pandemic began. Things like double-digit home price increases, low mortgage rates, and an increase in the economic confidence index could not have been predicted in April 2020. But that is the situation right now.
Is the housing market going to be different in 2022?? What can homeowners, home sellers, real estate brokers, and investors anticipate from the housing market in 2022?
Higher Rent Earnings in Certain Cities
Rental rates would keep rising in 2022 even as home value growth slows, eventually outpacing it. As was expected, the extended eviction moratorium has caused landlords to lose money, and they want to make it up. Forecasts indicate that rising housing costs could also raise inflation expectations over the long term.
Since rental prices have been increasing slower than home values in recent years, experts have concluded renting is still a more lucrative option than buying. Rental prices might increase even if home price growth slows down in 2022.
The desire for renting may rise as more potential buyers choose to rent as home prices hit record highs, mortgage rates rise, and affordability for potential homebuyers becomes a concern.
Rent Control Undertaking in Some Cities
When the federal rental moratorium expires, policymakers must best decide how to prevent a wave of evictions. Rent control could be one approach to addressing the issue. Even though there are arguments for and against rent control, it is already in place in some U.S. states, such as DC, New York, and Oregon.
Rent control or rent stabilization laws limit the amount of rent landlords in a given state, city, or municipality can charge. Politicians in some states might make proposals to review restrictions on rent control, particularly in those where the rate of rent growth is high.
One significant drawback of rent control is that when it gets out of hand, investors may need to reevaluate their multifamily apartment investments and possibly consider turning them into shadow rentals.
A Surge in Residential Construction
The Builder Sentiment Index, published by the National Association of Home Builders (NAHB), measures how optimistic builders are about the future demand for new homes in the housing market. A score of 50 or higher indicates that home sales have a bright future. Builders’ confidence remained steady at 83 in April and May 2021 despite the persistent price problem and a shortage of building supplies.
Builders must construct 1.1 million to 1.2 million single-family homes to satisfy long-term demand. By comparing lumber prices across high-volume production regions in the U.S. and Canada, the NAHB calculates that lumber prices have increased by almost 250 percent since 2020. New construction might thrive as prices for some building materials stabilize in 2022 and contractors buy stock.
The Mortgage Bankers Association (MBA) anticipates that the number of single-family housing starts will be 1.134 million. Future projections are even more upbeat – 1.165 million single-family homes in 2022 and 1.210 million in 2023, suggesting this could only be the beginning.
Increase in Days on the Market
There will probably be several competing offers if a home is priced reasonably. From listing to contract, it would take25 to 45 days. The U.S. had an average of 39 days on the market in May. Days on the market in 2022 will probably rise due to less competition and more inventory.
Due to the prolonged period of home price growth over the previous 12 to 18 months, some areas have become unaffordable for some buyers, which is another factor contributing to the likely increase in days on the market.
Cities That Anticipate an Increase in Housing Costs
In 2022, prices will continue to rise in most American cities. According to data from Zillow, home prices will increase in the following 7 locations:
- Austin, Texas (Travis County)
- Charlotte, North Carolina (Mecklenburg County)
- Columbus, Ohio (Franklin County)
- Memphis, Tennessee (Shelby County
- Phoenix, Arizona (Maricopa County)
- Riverside, California (Riverside County)
- Sacramento, California (Sacramento County)
Is the Housing Market Expected to Crash in 2022?
The housing market will probably not collapse in the upcoming years. According to experts, today’s market is very different from the housing crisis that contributed to the Great Recession of 2007–2009.
There won’t be a lot of foreclosures because the lending regulations are much stricter now. Additionally, the housing supply is still deficient and is unlikely to catch up for a few years, so there is little to no risk of a sharp decline in home prices. New technologies, such as software for real estate, are poised to impact all stakeholders involved in the industry significantly.
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