7 Real Estate Market Trend Predictions for 2022

The last two years have seen the housing market react unpredictably to new economic stresses. For example, the pandemic resulted in a large increase in unemployment, whilst the eviction moratorium prevented evictions so that many landlords had to deal with rent arrears. Plus, the housing market closed down for a period of months, and new builds were brought to a halt.

In spite of this, over 2021 the housing market saw an unprecedented boom, mortgage rates fell to historic lows (below 3%), and renter demands changed dramatically, with many renters moving away from expensive city centers to larger properties in more affordable suburbs.

Generally, the predictions for 2022 are positive, with housing prices continuing to increase, rental rates increasing, and the demand for rentals and house sales are continuing to grow due to supply shortages.

7 real estate market trend predictions for 2022

1) Home prices will increase

On average, home prices saw an increase of 18.1% YoY in Sep 2021. After an unprecedented increase in value you might expect a market correction, however, whilst some market experts predict a plateau, all suggest an overall increase in home value.

Realtor.com predicts a 2.9% increase in home values over 2022. Zillow, on the other hand, has a much more optimistic outlook and predict home price increases of up to 11%.

These increases are going to be driven by the high demand and low stock availability. It will remain a seller’s market. New builds because of supply chain issues and the freeze during the pandemic simply cannot keep up with demand and increased pressures.

2) Small portfolio landlords will either need to raise rents or sell up

Despite the fact that overall the housing market is looking positive, the pandemic has had a lingering effect with many small portfolio landlords realizing large losses. The eviction moratorium paired with ineffective emergency rental assistance has meant that outstanding rent arrears are still a problem for many.

This presents an opportunity for cash-rich investors. However, with high demand, new investors and first-time homebuyers will find it hard to compete.

3) Rental demand will increase

With high prices and limited stock availability, first-time homebuyers are going to find it hard to compete in 2022. Many of them will have no option but to continue renting for longer than they might have otherwise planned. This may lead to an increase in the overall amount of renters and an increase in demand for rental properties.

Realtor.com expects an increase of as much as 7.1% in rent amounts over 2022.

4) Renters looking for more space

With many first-time homebuyers pushing back their purchase date and with the normalization of working from home, many renters, including young families, will be looking for more space and more affordable rents.

We saw a rise in popularity for us more affordable suburban areas in 2020, and 2021. And it’s likely that this trend will continue. Amenities that renters are going to prioritize include homes with enough space for a home office, gardens, or outdoor space, as well as looking for family-friendly locations.

5) Rental vacancies to remain at pandemic lows

Vacancy rates across the US stayed between 5.7% and 6.8% over the last two years. This impact was in part due to the elongated eviction moratorium which prevented tenants from being evicted for non-payment of rent. However, even after the eviction moratorium expired, the predicted tsunami of evictions never happened and vacancy rates have remained low.

Realtor.com and Zillow are both predicting that this vacancy rate will stay at a similar range for 2022 which is good news for landlords.

6) Mortgage rates will increase

Mortgage rates fell below 3% and unprecedented low. However, it is predicted that whilst they will remain relatively low, mortgage rates will increase over 2022.

7) Demand for short term rentals will grow

Short-term rentals suffered through 2020 and 2021. In 2020, for example, demand for short-term rentals contracted by a huge 16.1% for the year. The pandemic stopped people from going on holiday, it stopped people from moving about.

However, as the new normal continues to be established, people are going to want to vacation. Because of this, experts predict high levels of demand, which paired with the delayed expansion of the available supply of new short-term rental units will mean at least two years of elevated occupancy levels for U.S. properties. Over 2022 then a rise in demand for short-term rentals which is good news for investors who have held their short term rentals throughout this difficult period.

Top 10 US housing markets for 2022

Not every location is created equal when it comes to rental property investments. Realtor.com has put together a list of the top 10 housing markets for 2022. These predictions are based on an extension of the 2021 trends. Growing economic momentum coupled with healthier levels of supply should position these markets for continued growth in 2022.

Salt Lake City in Utah is expected to lead the way for home price appreciation and sales growth with 8.5% and 15.2% predicted respectively. Boise ranks number two with home prices predicted to increase by 7.9% and sales to increase by as much as 12%.

Source: Realtor.com® 2022 Forecast

Final words

Low mortgage rates coupled with new work-from-home possibilities created by the pandemic as well as low stock availability have fueled a rise in housing demand, especially in lower-density suburbs. This demand is expected to continue throughout 2022. And, whilst experts predict a slowdown in the trends of 2021, they do expect those trends to continue. This is good news for real estate investors who have managed to weather the storm as they will be able to increase rent prices and will see excellent home price appreciation growth.

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