Six Residential Real Estate Trends Shaping the Industry
The U.S. housing market is the wild, wild, west right now thanks to record low interest rates for mortgages, high demand for housing and low supply of available homes.
While sellers stand to benefit, homebuyers and businesses involved in the residential real estate industry are facing numerous challenges that don’t seem to be going away anytime soon.
From supply chain issues to red-hot competition, here are six trends shaping the industry today.
1. Home Prices are Still on the Rise
Today’s outstanding home prices are influenced by many factors, including pandemic-related interest changes and supply issues, as well as decades of the industry falling short of housing demands. In short — the continuous low supply of homes available for purchase has increased prices.
According to Realtor, the median listing price grew by 8.6% throughout 2021 and the median listing price for a typical 2,000 square-foot single-family home rose 18.7% compared to 2020.
The latest predictions from housing economists at Zillow anticipate another year of rising home prices. However, the jury is still out among industry leaders on the anticipated pace at which prices will increase.
2. Interest Rates are Creeping Back Up
If the pandemic was good for anything, it was the historically low mortgage rates. However, home shoppers looking to buy this year should be aware that mortgage rates are inching back up and will likely hover at an average of 3.3 percent throughout the year. According to The Washington Post, “the Federal Reserve will look to raise the federal funds rate three times in 2022, while phasing out its bond-buying program, making it likely that mortgage rates will rise.”
3. Supply Chain Delays
We would be remiss not to mention supply chain delays, which are wreaking havoc on the industry. Over 90% of builders reported delays in receiving materials in 2021. Windows, appliances, lumber and steel are just a few of the many materials builders can’t get their hands on.
4. Incredible Competition
The competition among buyers remains fierce. Shoppers are pulling out all the stops, including making offers above-value, with all cash, and opting out of home inspections. In fact, houses are flying off the market.
Realtor’s January 2022 research shows that in the 50 largest U.S. metros, the typical home spent 52 days on the market, and homes spent seven days less on the market, on average, compared to last January.
Buyers with higher disposable income are obviously at an advantage. Unfortunately, some shoppers are now priced out of their preferred areas, especially young, first-time homebuyers. The good news, though, is that 2022 is predicted to hedge towards being a more balanced market than last year, so bidding wars should wane little by little.
5. Migration Shift
The pandemic caused massive migration shifts out of major cities like New York, Los Angeles and San Francisco. While cities are now rebounding and residents are returning, there remains a long-standing trend of people moving out of expensive, high-tax states to lower price, lower-tax states. Industry leaders note strong demand in Florida, Montana, Utah, Colorado, Texas, Georgia and the Carolinas.
6. Burst of Build-to-Rent Single-Family Homes
Build-to-rent (BTR) single-family homes are becoming increasingly popular across the country as more builders offer BTR options in typical subdivisions and master-planned communities. BTR homes benefit developers, builders and renters, which is why they’re so popular.
For renters, single-family homes provide more space and privacy than apartment communities and come without the expensive price tag of a down payment or financial commitment to homeownership.
For builders and developers, BTR development is a valuable way to attract residents from a wider demographic and provide more affordable options to those who want to live in a neighborhood.