Local Real Estate June 15, 2022

National Real Estate Market Update – Part 2

What do we have in store for the year ahead? Well looking at where we are right now and what is going on sheds great insight on what we should expect in the upcoming year. Let’s be clear, my own personal prediction of the real estate housing market for 2022 is that we will continue to see an increase in prices. I believe that what we are going to see in the upcoming year is very similar to what we experienced in 2021. Prices going up, interest rates still remaining low, although I do believe we will see some increases in interest rates, but relative to historical rates, they will still be relatively low. The lack of inventory, the high demand of buyers, and low interest rates are a sure sign of the housing market continuing to increase. According to a recent report from the National Association of Realtors, growth in the housing inventory has slowed over the past decade in the aftermath of the 2008 housing crisis, creating an “under building gap” of 5.5 million to 6.8 million housing units across the country since 2001. What else is happening that renders a positive real estate forecast for 2022. Rents and housing prices continue to increase due to the low supply and high demand. We are at a 4.2% unemployment rate which closely matches the unemployment rate back in March 2020 before the pandemic started. Job creation, new jobs coming to the market have mostly continued to increase month over month since the pandemic hit, but we are still not back to normal, we are about 4 million jobs short. The total Non-farm Payroll, which is the total number of U.S. workers in the economy that excludes proprietors, mostly has continued to rise since the pandemic hit. This graph shows the number of payroll jobs in the U.S. rising but not quite back to where we were prior pandemic We see a surge of home sales since the pandemic and this year was the most amount of home sales in 2021 than number of homes sold per year than in the past 15 years Median home prices have soared to all time highs at over 400,000. NAR asked 23 real estate economists and experts about their forecast on inflation. Here is a list of the experts and economists that they surveyed. The average was 4%, which by historical standards is still high, ideal inflation is 2% however, their prediction of 4% inflation is double the ideal rate, but is not as bad as the anticipated 6.8%. You can see from this graph what each of the 23 predicted, w/ the lowest predicting 2.7% inflation rate and the highest at 7.5% w/ one expert predicting that but the average is 4%. What about home price appreciation, the average consensus is that home prices will rise 5.7% from our expert panel, but remember last year they predicted home prices would increase by 6.8% but the actual price increase for 2021 was 20.3%. Here you see one expert on the negative end of median appreciation decreasing by 10% and on the positive side two experts predicting as high as 12% median home price increase. The median panelists agree that the federal reserve will be raising interest rates two times next year, that is the average consensus. The average being 2 with eleven experts predicting that, but 8 experts are predicting only one interest rate hike. Its important to understand that from an affordability standpoint, a consumer buying a home today vs. a year ago, their payment is going to be less now, even though prices have gone up since interest rates are so low. So based upon all this data, with interest rates still incredibly low and with
the number of new homes across the country that are still completely depressed and needing more new homes to support buyer demand, as well as the fewer number or homes hitting the market, my guess is that the 2022 real estate market forecast is going to be hot hot hot, pretty much a replica of what we saw in 2021. There was so much demand, and lack of inventory that prices kept creeping up, buyers were willing to pay more for homes than what homes were listed for across the board, and giving sellers pretty much anything they wanted. Sellers had all the leverage and were taking offers with little or no contingencies and the terms of the contract mostly were in the seller’s
favor. In my opinion based upon the data, this year is going to be similar, especially in the first half of the year. So a quick recap, on a positive note. The economy looks good, the tide is rising. Buyers want to buy, and they want to buy a lot. Rates are low and should remain low relative to historical rates. The market is incredibly attractive to sellers. Sales will stay competitive, solid and strong next year. And home prices will keep rising. The bad news and what is dampering our housing market is that we still aren’t building enough homes, there are more buyers than homes. Obviously the pandemic has created challenges for us. It’s getting harder and harder for first time home buyers to enter the market because of the increase in prices and low inventory levels. Hope this was helpful, if you’re looking for more real estate market updates, be sure to subscribe to my YouTube Channel.