7 US Real Estate Trends and Predictions for 2022
Thanks to the global pandemic, economic downfalls, and supply chain issues, the real estate industry has often felt unpredictable over the last two years.
If anything, the only constant has been chaos, as we’ve watched buyers swarming for new houses, professional workers streaming out of major cities for rural homes, and contractors struggling to start new projects with skyrocketing construction costs.
Despite all of the noise and distractions, we’re spotted some significant trends over the last 24 months, and we’re making some confident predictions for the United States real estate industry in the new year.
7 Real Estate Expectations for 2022
Here are some of the real estate trends we’re predicting for 2022:
1. We’ll continue to see housing prices increase.
I’ve seen some estimates saying home prices will shoot up by double-digit percentage points in 2022. I’ve seen other estimates that they’ll rise by roughly 4%.
One thing’s for certain: housing prices will likely continue to increase in 2022. With so few options on the buying side, this is still a seller’s market, so expect to pay even more for homes in 2022 than in 2021.
2. Expect serious buying competition for turnkey properties.
We’ve seen stiff competition among buyers in 2021, with many buyers making offers above asking. Because of this, some homes are seeing dozens of offers and selling in a single weekend or even within only a few hours of being on the market.
Many would-be buyers were squeezed out of the competition this year, and they’ll reenter the market this spring and summer—with everyone else—smarter and more aggressive as they fight to land a new home this time around.
3. Reduced cost of construction should lower the cost of new homes.
The cost of new construction skyrocketed in 2020 and 2021, as a combination of inflation, supply chain issues, and poor forecasting led to a shortage of construction materials. In 2020 alone, the price of softwood lumber shot up nearly 80%, and hardwood lumber crept up by almost 20%! These price hikes by themselves meant new home prices shot up by about $36,000 on average.
In 2022, though, we should see many of those supply chain issues ironed out. And as the economy continues to rebound, the cost of new materials should decrease, lowering the price tag of new homes in the process.
4. Smaller, more affordable cities will continue to grow.
In a trend that we’ve already seen in Allegheny County, homebuyers will continue to pursue larger, less expensive homes in smaller and more affordable cities and rural communities.
One of the biggest reasons behind this is reduced demand for commercial real estate while employers continue to offer work-from-home options. As employees see less need to be physically close to their employers’ physical headquarters, they’ve left for greener pastures (sometimes literally), causing the sudden growth of “Zoom Towns”—towns that have experienced sudden population growth from professional workers who are no longer geographically tied to a certain area.
5. Rent prices will increase.
Like many business owners, landlords found ways to adapt to the financial hurdles of the pandemic, especially as eviction moratoriums and rent freezes took some of their power away in collecting overdue rent—rent totaling $7.2 billion! Some thrifty landlords took advantage of mortgage deferral programs to help see themselves through the pandemic, but those programs don’t last forever.
2022 will be the perfect opportunity for rent prices to increase. When eviction moratoriums and rent freezes disappear, landlords will once again expect payment. And when those mortgage deferrals expire, they’ll need the income to help pay off their own debt! All in all, landlords will want to make up that $7.2 billion loss, and increasing rent prices is the fastest way to do that.
If anything, the increase in housing costs will only support decisions to raise rent prices. After all, renters will ultimately have to choose between a rock and a hard place: Do they want to pay extra to put down roots, or do they want to pay extra to keep some of their freedom as a buyer?
6. Expect big moves from Zillow and similar companies.
The downfall of Zillow’s buying arm in 2021 was the final act of a surprising misstep for the tech giant, and many of us in the industry are still trying to piece together how such a smart, tech-driven company could let such a significant portion of its business be so poorly run.
Although Zillow stock has dropped dramatically (it fell from nearly $106 at the end of October to around $50 in late November), don’t be surprised to see the company come roaring back in the new year.
This is a smart company that has a history of making data-backed decisions, and its leadership should learn from its very public mistake as it focuses on the future ahead.
7. Expect real estate funds to continue expanding their footprint in the market.
In Q3 of 2021, 16% of all houses sold in the United States went to real estate funds.
That’s huge, as it means more and more portfolio managers are gobbling up residential real estate.
Left unchecked, this could significantly change the way people buy and sell residential real estate over the next 10-20 years, as we may soon see a record-high number of properties sold by private/public firms or operating as income-generating SFRs.
As long as no laws or government regulations stand in their way, expect these companies to continue buying up properties—and focusing their efforts in specific neighborhoods to increase the overall value of each portfolio.
Learn More About the US Real Estate Industry
For additional insight into the real estate industry for 2022, contact us. At New Local Realty, we’re keeping our eyes on the most exciting and profitable real estate markets in the United States, and we use that data every day to better serve our clients and investors!
