As individuals across the globe begin a new chapter in 2022, they are also reflecting on the trials and tribulations that encompassed another year dominated by the COVID-19 pandemic. Included in this retrospection are housing market researchers, who are analyzing projections for what trends homeowners/prospective buyers can—and should—expect to see in the new year.
“2021 was an incredible year for residential real estate prices,” said researchers at Realtyhop, a real estate website renowned for their utilization of the real estate market’s “quantitative metrics”.
In late December, Realtyhop generated real estate market predictions for 2022 by analyzing the 2021 housing market trends and what triggered them, of 50 of the largest cities in the United States, which they compiled into a “Review Report.”
One of the key predictions the researchers concluded from the 2021 market data is that home values are continuing to rise, stating that in 2021, there was a nationwide home price increase of 14%.
The expectation for this trend’s subsistence is based on the Federal Reserve’s announcement, made last week, that it plans to elevate interest rates starting March 2022, ending the “rock-bottom interest rate era.”
“The rate will likely go up 75 basis points by the end of 2022,” according to Realtyhop. They estimate that the 30-year fixed mortgage rates will reach “3.7%, and 5/1 ARM will become a more attractive option,” as the upward trend is projected to continue through 2024.
Although rising interest rates may reduce housing demand, researchers note that the impact of this shift may be minor due to the fact that the current rates are still advantageous for prospective homeowners.
As we observed in 2021, the madness that resulted from remote work was a heavy driving force for individuals to move from their cramped city apartments to the suburbs in search for greater living spaces. “In Austin, TX, where an average of 180 new residents moved into the city every day, the median asking price skyrocketed 27.7% in 2021,” according to Realtyhop. Meanwhile, home prices dropped 2.8% year-over-year in Philadelphia, PA.
In New York state, data scientist, Shane Lee noticed that, certain cities west of Hudson River saw more growth in the past year, including: “Saugerties (24.6%), New Windsor (28.0%), Newburgh (19.7%), and Catskill (27.7%).”
Lee added that “prior to the real estate boom and migration from NYC induced by the pandemic,” these areas of New York were much less popular, in comparison to cities east of the river.
In addition to relocating away from the metropolitan areas, researchers discovered that there has been a spike in demand for more sizable homes since March 2020— when the pandemic began—which they expect to continue through 2022. The researcher’s predict the preference for two and three-bedroom homes will surpass studio and one-bedroom homes.
“There’s a correlation between these two factors despite rising construction costs,” the researchers say, referring to the price of lumber; which has surged to $1,100 per thousand board feet (41% higher than a month ago), according to Nasdaq.
With the cases of the new Omicron strain still raging, the housing market’s rates only appear to be skyrocketing; creating an unstable environment for financially insecure individuals. Soon, however, Realtyhop researchers expect housing demand to “plateau,” they said.
“The market will likely cool off but remain strong until supply catches up.”
Click here to read the full report.
