The real estate industry may return to normalcy, but rising prices, rents, and interest rates, as well as construction barriers, will continue to be a trend in 2022.

Homebuyer activity in the United States has highlighted a housing shortage in 2021, particularly for homes in the entry- and mid-level price ranges. With supply chain issues, labor shortages, and regulatory practices slowing new home construction even further, houses aren't being built fast enough to meet demand, and home prices are rising rapidly as a result.

Looking ahead, homebuyers, sellers, renters, and investors can expect more of the same in terms of continued high demand, with some return to seasonality and an increase in interest rates that may have a minor impact on real estate transactions.

Here are a few housing market trends to watch in 2022:

  • Available housing inventory will remain limited, and rising prices will put a strain on affordability.
  • Interest rates will rise, but wage growth may help buyers find a happy medium.
  • The rental market will likely continue to grow, but at a slower pace than in the previous two years.
  • There is a lot of excitement surrounding new home construction, but it is unclear when labor and supply issues will be resolved enough for homes to be completed.

Here are experts' predictions for the housing market in 2022 for buyers, sellers, renters, and new construction.

Buying

The 30-year fixed-rate mortgage has an average interest rate of 3.1 percent, according to Freddie Mac. The Federal Reserve has indicated that it intends to raise interest rates this year. Other economic factors are likely to come into play, which will help alleviate affordability concerns. According to Zillow, home prices in 2021 will be 19.5 percent higher than in 2020.The scarcity of available homes, particularly at entry- and mid-level price points that first-time homebuyers can afford, is one factor driving up home prices.

Selling

Because of low interest rates, many homeowners are hesitant to sell their homes. Foreclosures and auctions will increase, but not to the extent of the 2008 housing crisis. As seasonality returns to the housing market, appropriate pricing and reasonable expectations are required. Sellers should have a plan in place before putting their home on the market.

Renting

The rental market recovered in 2021 after a rough start to the pandemic, which saw many people leave apartments in search of more space through homeownership. Rental demand has mostly returned to major cities, but it is still present in suburban areas. According to Zumper, the national median rent for a one-bedroom apartment has risen 12.1 percent in 2021, while rents for two-bedroom apartments have risen 13.2 percent.

The rapid rise in rent, like the rise in home prices, indicates high demand, but sustaining the same rent increase in 2022 is unlikely. "I don't think we'll see another year of 12 percent to 15% rent growth next year," says Anthemos Georgiades, co-founder and CEO of Zumper.

The end of the eviction moratorium established by the Centers for Disease Control and Prevention in response to the pandemic in 2020, which ended in August after the Supreme Court ruled the extended moratorium unconstitutional, is also having an impact on the rental housing market.

So far, the end of the moratorium has not resulted in the mass evictions that many feared, but eviction numbers have been "climbing month by month," according to Georgiades. He does, however, note that they are still lower than pre-pandemic eviction rates.

Eviction rates are likely to return to pre-pandemic levels in 2022, especially as demand for rental housing continues to rise in many parts of the country. However, Georgiades believes that state and local policies will have the greatest impact on how eviction is addressed in the future.

New Development and Construction

For years, the rate of new housing construction has lagged behind the rate of new household formation, owing to local zoning issues and labor shortages that began during the Great Recession. The pandemic exacerbated material shortages, rising prices, and supply chain delays.

As a result, construction is taking its time to ramp up and alleviate housing demand. "We'd have to double the rate of new single-family home construction," Miedler says.

Despite ongoing supply issues, builders are feeling more confident, according to a new survey. Low housing inventory and high demand appear to be the most important drivers of confidence today. Permits for nearly 1.5 million privately owned housing units have been approved so far in 2021, with many of them expected to be built in 2022.

Source: USNEWS