The post-pandemic world looks much different than it did two years ago and the real estate market has not been immune to that. With an increase in remote work, hybrid work, and the occasional quarantine, the coronavirus has changed how Americans view their home. It’s not just as an investment, but a place where we spend most of our time. This demand for home office space (or just more space in general) created a market stimulus in 2021 that experts believe will continue into 2022.

These changing views on work, combined with historically low mortgage rates, and a shortage of homes for sale created the cutthroat housing market we saw in 2021. Will 2022 real estate continue the feverish trends of this last year? Whether you are considering purchasing a home, selling your current home, or renting here are some real estate market predictions for the new year.

Buyers

If you’re between the ages of 26 and 35, you’re one of the 45 million Millennials in that prime “first-time homebuyer category.” The bad news? The record-low interest rates of the last year are forecasted to grow. But here’s the good news: experts predict incomes will climb by 3.3 percent, so those bigger paychecks should help cover those bigger mortgage payments. Plus, rising interest rates may help relieve some of the pressure from the real estate market—and less demand means less competition for buyers.

Waterfront homes in Kent County, MD have been selling in days. Great for home sellers, very challenging for home buyers.

As families embrace untethered working arrangements, they are free to move from expensive metros to lower cost-of-living communities. As they cash-in the equity from their existing real estate, they enter lower-cost communities able to bid above asking prices with hefty down payments. Because of the low inventory of homes for sale, less fortunate buyers are forced to make compromises on amenities or forced out of the market entirely. 

The number of houses on the market saw record lows last year and will continue to be limited as homebuyers contend for scarce resources. However, as sellers become less hesitant to list and builders catch up with demand, inventory is predicted to grow by an average of 0.3% this year. That number may seem tiny, but it could snowball. As more new construction become available and more homeowners are willing to sell, the real estate market could shift toward buyers. And while supply and labor issues largely inhibited the construction of new homes in 2021, builders are hopeful that their sales will increase in the coming year.

New Construction

With the pandemic came unforeseen shortages impacting construction materials and skilled labor. Moving into 2022 builders are dealing with an unbalanced pipeline of unusually high demand coupled with construction road blocks. While builders expect to sell more homes in 2022, they are still very anxious about continued challenges. Plagued by supply chain shortages, building materials cost more and take longer to deliver. Nationwide, new construction revenues continue to climb into 2022 as optimism strengthens that the building supply chain will correct itself. Eventually, built homes will be sold, those under construction will be finished, and materials will become available to begin new projects.

Distressed Properties

Foreclosures and short sales were at all-time lows during 2021, adding to the short supply of homes for sale. Some may believe families were simply able to “get by” during the pandemic while experts point to federal and private aid propping up statistics through unemployment protections for employees and businesses. The federal government stepped in during 2021 and delivered a moratorium on foreclosures to help unemployed families weather the economic uncertainty. That forbearance was lifted in mid-2021 and most unemployment programs have ended leaving experts forecasting distressed property upswings throughout 2022. Privately, banks and other lending institutions once offering relief programs are now looking to restart payments while forcing cash-strapped borrowers with financial difficulties into short sales or foreclosure. 

What does an increased level of distressed properties mean for the 2022 real estate market? Higher inventories of bank-owned properties could mean a boom for the tight inventory of listings. Distressed properties often are sold 20-50% lower than market value. This can mean big wins for commercial property investors as they flip or hold distressed homes for income. 

Sellers

Considering selling your home? Now is the time! The real estate market strongly favored home sellers in 2021 and promises to continue in 2022. Home prices already soaring from the previous year are predicted to grow another 2.9 percent in the next year.

Billy Sutton is part of The Sutton Team at Coldwell Banker Chesapeake in Chestertown, MD.

With homebuyers scrambling to find options this past year, sellers often received offers immediately after listing their house on the market—sometimes even before. These are called “immediate sales,” and they don’t show signs of slowing anytime soon. Even if you don’t sell right away, the median time a home spends on the real estate market is about half of what it normally is at this time of year. This forecasts high demand continuing into 2022.

Renters

With the real estate market as competitive as ever, many potential homebuyers chose to continue renting in 2021. Reasons for doing so could be budgetary but could also be linked to the short supply of homes on the market. Potential homeowners face numerous showings, high asking prices, and bidding wars. Their excitement may turn to frustration quickly, sidelining them back to their rentals once again.

The rental market may be tumultuous in 2022. Apartment inventory is predicted to be tight with demand outpacing supply. The cost of rent is projected to increase 7.1 percent next year, growing even faster than the price of homes. This means that renting could become less affordable than owning a home. One reason for increasing rents is the eviction ban levied by the federal government in 2021. Landlords could not evict non-paying tenants which delivered blows to many owners without strong balance sheets. Property owners are now raising rents to try and make up for lost revenues.

Conclusion

While predictions are never 100% accurate, one thing is certain – the real estate market is turbulent for buyers. Working with a qualified real estate team has never been more necessary. The Sutton Team will steer your transaction through difficult negotiations and protect your interests. Don’t hesitate to call our office and schedule a showing today!