Home buying trends aren’t just for home buyers. Home sellers can maximize their profit by paying attention to buying trends as well. And for real estate agents, understanding real estate trends and being able to explain them to your clients can give you a competitive advantage in your local market.
While we don’t have a crystal ball, innovations in data analytics combined with good old-fashioned experience can go a long way toward identifying trends as they emerge. Here are five home-buying trends to watch for in 2022.
5 Home Buying Trends in 2022
1. Stabilizing Market Conditions
Since the outbreak of the COVID-19 pandemic, the real estate market has been out of control. Data from Zillow indicates that home values rose 19.6% from December 2020 through December 2021. This growth has been beneficial for homeowners, who’ve enjoyed major gains in equity over the past few years. It’s also made life difficult for buyers, many of whom have been priced out of the market entirely.
We’re not going to suddenly shift to a buyer’s market in 2022. But we are going to see things start to calm down. The growth of the last few years is completely unsustainable, and 2022 will see a gradual shift to a more balanced market.
Why will the market start slowing down? Well, some buyer demand is dropping off because of skyrocketing prices. And some buyers are going to decide against purchasing a home in 2022 because of the increasing interest rates. Which brings us to the next home buying trend for this year…
2. Rising Interest Rates Decreasing Buying Power
The Federal Reserve has plans to raise the interest rate multiple times in 2022 to combat today’s inflation. Raising interest rates combats inflation by reducing the incentive for buyers to borrow money. If it’s more expensive to borrow money, fewer people will make large purchases. Then there will be less demand for goods, which prevents prices from rising unsustainably.
Projections from January 2022 indicate that interest rates could rise by a full percentage point over the coming year. This might not sound like a lot, but a single percentage point increase can reduce purchasing power by 11%! This is because more of your mortgage payment goes toward interest, leaving you less to spend on the home itself.
This looming interest rate increase might incentivize some buyers to make a move early in the year. But it may discourage people from buying as the year goes on.
3. Continued Demand for Affordable Housing
The inventory of homes available for purchase is exceptionally low. And the inventory of affordable homes is even lower.
According to Redfin data from January 2022, new listings were down 10% year-over-year. And active listings fell 27%, dropping to an all-time low of 482,000. This means there just aren’t enough homes available to meet the buyer demand. Economists note that senior homeowners are opting to “age in place,” rather than selling their family homes to move into condos or retirement communities, as they did a generation ago.
So why not just build more new homes? One reason we can’t just build new homes is that so much of our cities’ land is zoned as single-family residential, preventing builders from developing multi-family housing complexes to meet the demand of high-density areas. In 2021, Mayor Eric Garcetti of Los Angeles announced the launch of the Accessory Dwelling Unit (ADU) Standard Plan Program, which is intended to make it easier for owners of single-family homes to build ADUs on their properties. These ADUs can be built comparatively quickly and easily to help provide affordable housing throughout the city.
But even with zoning and permit laws relaxed, the current labor shortage and supply chain issues we’re experiencing as fallout from the pandemic are causing serious delays in building new homes.
So we can expect the housing supply shortage to stick around in 2022.
4. Less Emphasis on Workplace Proximity
The work-from-home revolution created by the pandemic has given many home buyers the flexibility to choose their search area based on factors like affordability, weather, and proximity to family rather than proximity to their workplace. Rather than paying more to live in smaller homes in major metro areas, today’s buyers are willing to live further away from major employment hubs.
Many workers are even moving states to reduce their income tax burden. States like Nevada, Texas, and Florida are seeing increased demand, partly due to the fact that they don’t have a state income tax. A Californian who pays around eight percent in state income taxes, for example, could move across the border to Nevada, and instantly save that major expense.
5. The Sun Belt May Be Cooling (Slightly)
The Sun Belt markets have been sizzling for years now. But the extreme value growth has made these desirable markets too expensive for many buyers.
Don’t get us wrong; Sun Belt cities like Phoenix, AZ, Austin, TX, and Ft. Myers, FL, are still in high demand, with lots of buyers moving to those areas from more expensive cities like San Francisco, New York, and Los Angeles.
But as Sun Belt home prices have risen beyond the point of affordability for many buyers, this hot region is getting some competition in 2022 from affordable cities in the Rust Belt of the Midwest. Long-overlooked cities like Indianapolis, IN, Columbus, OH, and Harrisburg, PA, are drawing buyer attention with their sub-$250,000 median sales prices.
Do You Want to Get in on Today’s Exciting Real Estate Market?
Getting a real estate license allows you to make a living helping buyers and sellers navigate the exciting real estate market. And it’s easier than you might think to get a license. Simply complete your state-required education with an affordable online real estate course. Then pass your state exam and complete your license application. Just a few months from now, you could launch your new career!
Make 2022 the year you make your move!