The US housing market experienced unprecedented movements in housing prices and shortages. Many look at these housing market trends and wonder what will come next.
Many buyers feel priced out and continue waiting for housing prices to fall. Meanwhile, sellers wonder if they should sell at the top.
The current US housing market has left buyers and sellers with many questions. They wonder which US housing market trends will happen next.
Will prices continue to increase? Should prospective buyers wait for a housing crash? How is consumer behavior changing?
We seek to answer these questions and provide a glimpse into housing market trends for 2022. If you want the inside scoop, we have got you covered. Keep your eyes wide open for these trends.
#1: Decelerating Home Appreciation in the US Housing Market
The US Housing Market grew significantly in 2021. Median housing prices grew by double digits in many areas. Some metropolitan markets saw housing prices rise by over 20% year-over-year.
Housing market trends suggest continued growth into the New Year; however, this surge may decelerate.
The National Association of Realtors predicts prices for existing homes will rise by 2.8%. They also expect a rise for new homes to the tune of 4.4%.
While homeowners always prefer appreciation, these gains may not outpace inflation; however, the past two years provided homeowners with an excellent head start.
Housing prices cannot go up forever, and fewer people can afford to enter the US housing market. Sellers still have control, but they need to keep their prices within reason. The National Association of Realtors' growth predictions highlight this concern.
#2: The Housing Market Will Remain Strong
Anytime an asset experiences strong growth, people wonder if it will crash. Every year, you will find several people claiming the stock market will crash soon. A broken clock is right twice per day, and 2022 suggests a crash is unlikely.
The housing market does not have the same fundamentals as it did in the Great Recession. Leading up to the Great Recession, almost anyone could become a homeowner.
Lenders offered sub-prime mortgages to buyers with no job or income. Lenders handed out these NINJA loans without reviewing a borrower's finances.
They intentionally failed to determine if a borrower could pay back the loan. After the beginner-friendly rate vanished, defaults flooded the market.
Limited supply drives the current US housing market instead of exuberant greed. Today's buyer must qualify for a loan.
Lenders will assess your credit score, income, and other factors. They want to make sure homebuyers can pay back the loan.
These safety measures were not in place leading up to the Great Recession. Banks got greedy, and taxpayers endured the burden during the bailout.
#3: Higher Mortgage Rates
Mortgage rates determine housing prices. If mortgage rates significantly increase, fewer people will buy homes. Sellers lower housing prices to compensate for higher rates.
The current US Housing Market should not suffer from excessively high mortgage rates. Current rates are still incredibly low, but we can expect a slight uptick in mortgage rates this year.
The government needs to control inflation. Last year, inflation hit 6.8%, the highest rate in almost 40 years.
Governments curb inflation by reducing the money supply. Raising interest rates is their most common strategy to cut down on the supply.
The Fed has been hesitant to raise interest rates for years. When they do raise rates, it is nothing dramatic. Homebuyer demand should still remain strong.
#4: The Rental Market Will Decelerate
The US Housing Market influences rental prices. They are positively correlated.
We see this correlation because people need a place to live. If people get priced out of a house, they will become renters.
Real estate investors want to capitalize on rising prices. Therefore, these investors bump up the rent.
Landlords raised rent by double-digits in 2021. Zumper reports that rent for a 1-bedroom apartment increased by 12.1% year-over-year. They also reported a 13.2% year-over-year increase for 2-bedroom rentals.
Rents will increase year-over-year, but not the same rate as the past two years. Wage growth can help some renters gain ground on rent hikes.
#5: More People Will Buy Homes Without Scheduling a Visit
The pandemic dramatically changed consumer behavior. Lockdowns and restrictions introduce new behaviors while accelerating existing trends.
The pandemic sped up the adoption of online home purchasing. Due to lockdown and social distancing measures, realtors could not show homes in-person. They had to resort to digital tools and resources.
Investors could not jump on planes to see the property. Some were willing to drive long hours to reach their destinations; however, many investors bought online, sight unseen.
A study revealed that 5% of homebuyers bought a home without setting foot on the premises in 2020. Even during the height of the pandemic, people wanted to buy homes. Realtors accommodated this demand in a new environment.
Instead of an open house, realtors opted for 3D virtual tours. They took pictures of the property and turned them into a tour for people to walk through as if they were walking through the house in person. These tours were posted on sites like Hommati.
These efforts made prospective buyers feel as if they were in the home. They could see each room and gather details on the space better than just looking at still photos.
This trend emerged before the pandemic. More people embraced this approach during the pandemic and continue buying homes online.
The current generation is comfortable with purchasing goods and services online. Some people only know a world with online shopping.
Purchasing a home online is more convenient. You can virtually visit a house at any time of day. Homebuyers are no longer confined to open house hours.
Homebuyers can also go on several virtual tours each day. They can tour a house in Nashville and a house in San Diego on the same day. This scenario was not possible before technological innovations in real estate.
Homebuyers will still pay for inspections and other necessary services; however, fewer homebuyers feel a need to visit homes before making offers.
#6: Housing Constructions Will Take a While to Ramp Up
Some people turned towards housing construction to save money. We saw increased constructions at the start of the pandemic, but supply chain issues soured up this industry.
The supply chain has made housing construction materials more difficult to find. When you do find them, these materials come at higher price points. The profit gap between buying and constructing a home is narrowing.
Labor shortages add complications to this industry's comeback. Many companies are struggling to fill positions. These companies have increased salaries to fill positions and retain employees.
These extra costs pass onto the consumer. Higher costs make this solution unaffordable for many customers, but housing construction companies need these high prices to generate a profit.
The industry will ramp up as supply chain issues fade into the past; however, we can only speculate when we can finally look at these issues from the rearview mirror.
Some home buyers will prefer avoiding the hassles of housing construction. The benefits look less attractive given the current housing market trends. We can see a recovery in the second half of 2022 if supply chain issues get resolved by then.
#7: The Work From Home Trends Leads to a Suburbs Boom
The work from home trend made people less dependent on a single location. Some companies let employees work from home in a hybrid structure. Other companies switched to an entirely virtual format.
Workers like the flexibility of working from home and support the Great Resignation. More people are quitting and looking for jobs that offer a work-life balance.
As fewer people need to work in the city, some are questioning the high cost of living. Why pay for city life when you can live in the suburbs instead?
Many workers needed to live near a city before the pandemic. They often worked in the city. Virtual work changes the landscape.
People can move further away from the city, knowing the commute is a thing of the past. Suburbs present an affordable, nearby solution to the city.
Many people see suburb housing as a way to live close to the city without paying city rates. Since more people can make this switch, suburb prices stand to rise.
Stay Updated on the US Housing Market
The US housing market has grown rapidly over the past two years. This initial growth can simmer in 2022. In fact, many experts project growth at a slower pace for 2022.
Housing market trends indicate where the market can go. Staying updated on the US housing market lets you capitalize on changes in real-time.
Hommati helps buyers and sellers stay updated on their markets. You can view houses in your area and see their prices. Search for a home on Hommati today.