Real estate predictions for 2022
We asked several real estate professionals and experts to get out their crystal ball and give us their best real estate predictions for 2022.
We wanted to know if real estate prices would continue to increase, or were we headed for a housing bust? Should we expect interest rates to rise to curb inflation and much more. Here’s their thirteen predictions.
1. Will real estate prices continue to increase?
The last two years have been a wild ride for real estate sellers. Do you think prices will continue to increase?
Matiah Fischer, a Las Vegas Realtor® and the Founder of RetireBetterNow.com
‘I foresee a leveling of real estate prices by the middle of 2022, followed by several months of declining median home prices to end the year. I believe this for two reasons. One being that sooner rather than later, the government will need to increase mortgage interest rates to cool inflation. Two, I don’t think we’ve seen the true impact that automation will have on the workforce. It’s my opinion that we have a major unemployment crisis brewing in the coming years that will be caused by the automating of many sectors and jobs in our economy. I believe in 2022, we’ll see the first signs of this taking place, which will have a small negative impact on home prices and rents.’
2. Do you see any hope of home prices returning to normal in the next year?
Paul Donovan, a real estate attorney in Palm Beach County, FL
“In 2022 the Fed will have to raise interest rates to stave off hyper-inflation. This will start a prolonged period of rising interest rates that will affect all asset classes including real estate. Inflation combined with higher interest rates reduces the amount of money entry level buyers have to spend on monthly mortgage payments. Unless wages rise at rate higher than inflation and interest rates, the price entry level buyers will be able to pay will decrease. It’s simple math. Prices may continue to rise throughout 2022 as buyers use savings to buy homes in fear of being priced out of the market but I expect a turn in the market to begin in Q3 2022.”
3. What should people who are thinking of moving be concerned about in 2022?
David Reischer, a New York City attorney and CEO of LegalAdvice.com
“Buyers of residential real estate will need to be very careful to look at the financial health of the city, county and state where they intend to buy property. Many local budgets are now completely in the red due to the unhealthy state of the economy. Property taxes are therefore likely to climb upwards, especially in major metropolitan areas. If property taxes continue to rise, then this will be a significant drag on real estate prices in the year ahead.”
4. Will rents taper or continue to climb this next year?
Rents have skyrocketed over the past few years. Do you think rent prices will go back down?
Ben Fisher, a real estate broker from Park City, UT
Supply is unable to keep up with the pace of growing demand. As a result, rent prices are soaring and look to go like this even in the next summer. The rent prices for the rich are plummeting, while the lower-class and middle-class people are burning in the rising rent prices. Material shortages along with increased labor cost, evictions law being terminated and the hot housing market with increased home prices. All other real estate activity is coming back to the fact ‘Rise of rent prices in the coming year’. There are really less than a few signs that rents taper. “
5. Will we see a housing bust?
Some markets are starting to see a slow down. Is this regional, or are we seeing the symptoms of a future housing bust?
Chase Michels, with the Chase Michels Group, a real estate brokerage in Downers Grove, IL
“We are already beginning to see buyer demand fall in the Chicagoland market. Less multiple offer scenarios than over the previous 12 months and sellers are still over listing their homes. Prices will slowly begin to decline as the initial Covid suburbs rush has subsided. Interest rates are creeping up. We are finally seeing homes sit on market because buyers aren’t being as aggressive as they previously had been in the middle of Covid. Interest rates will slowly increase and negatively impact buyers and sellers. New construction homes have been lagging at a historical rate and it will be interesting to see if builders begin to increase the rate of builds given tons of uncertainties like millennials’ appetite to move to the suburbs.”
6. Will the government have to rein in inflation and cause mortgage interest rates to rise?
Robert Scott, founder of SellLand.com
“Forecasting mortgage rates for the upcoming year is relatively simple if you look at the main factors that drive it upward or downward. Expected rise in mortgage rates are attributed to waning Covid-19 cases, inflation and gradual economic recovery. From my professional experience, these are enough key elements to be quite certain that next year’s rates are going to escalate, though actual percentage of the rise is hard to predict. “
7. If so, how much longer before interest rates go up?
Nicholas McMillan, founder and owner of Hire Realty LLC in New York City
“The Federal Reserve has already declared that the era of ‘3 percent mortgage rate’ will come to an end soon and the rate will increase steadily and ‘Modestly’. It wouldn’t be surprising if the housing market sees a 4% mortgage rate within the next summer. The inflation of the housing market is stabilizing and coming to balance. The investors, sellers and homebuyers should be seeing [a partial return to] a traditional real estate market. It’s not really necessary now for the government to rein in inflation.”
8. Will entry level homeowners be priced even further out of the market?
With the great wealth migration of the past two years, many entry level buyers have had to compete with cash buyers. Will new buyers be priced out of the market?
Bill Samuel, with Blue Ladder Development a real estate investor and developer in Chicago, IL
“The current supply of homes for sale is still very low and roughly 58% less than pre-pandemic levels. Expect a very competitive market through 2022 with multiple offers on most of the properties you are interested in. Available inventory is still low but it is slightly higher than it was at the start of 2021. While the market may not be as insane as the last several months it is still much more competitive than before COVID started.”
9. Will rent control become more predominant in 2022?
Several cities around the world have voted to implement some kind of rent control. Do you see this becoming a bigger trend?
Zac Houghton, CEO of Loftera, a UK construction company
“The issue of rent control is coming up again in the big picture for 2022 political races. As it stands, most cities don’t use rent control. However, some cities are rethinking this trend, especially as the housing market is very hot right now..”
Keith Sant with Kind House Buyers in Tacoma, WA
“Rent control will have a more prominent role to play in the coming months. With the housing shortage causing rent to increase at such a scale, there will be a need for some form of control; otherwise, people might not have any more housing options.”
Khari Washington, with 1st United Realty and Mortgage, Inc in Loma Linda, CA
“Rents will also continue to be strong. There will continue to be a lot of demand for rentals, especially nonluxury property rentals. Rent control has continued to expand. However, many of the areas that were looking at creating rent control laws have put their laws in place. Over time it will become more predominant, but I don’t know if that will be next year.”
10. How will supply chain issues impact housing prices in the coming year?
Nicholas McMillan of Hire Realty continues,
“The supply chain dysfunction and labor shortages have already been manipulating the housing market. Due to the scarcity of labor, the recent construction cost has gone higher by at least 3.4% just in the last three months. This has caused the construction market to swallow the cost-push and demand-pull pressures. Ultimately this surge will increase the housing prices. For example, the price of lumber has increased by 40% to $672.50 per thousand board feet due to this shortage of supply and labor costs.”
11. Will lumber prices continue to add to the cost of home builders?
Lumber prices have gone through the roof in the past two years? Will they continue to be a problem?
Brady Bridges, owner of Reside Real Estate, a real estate brokerage in Fort Worth, TX
“The increased price of lumber has caused an additional cost on newly constructed homes – around $36,000 on average. The high prices of lumber has been causing a lot of trouble for the construction market. The construction material prices have increased by 23.1% throughout the whole year. Lumber is the leader of those high-priced materials. To overcome this problem construction firms are looking for alternatives. Some of the construction firms have come up with ideas to replace lumber in framing or foundation due to its skyrocketing price. ICFs (Insulated Concrete Forms), CFS (Cold-Formed Steel) or Light Gauge Steel Framing, and SIPs (Structural Insulated Panels) are some top contenders to replace lumber.”
12. How will natural disasters impact the affordability of insurance and housing?
California fires have caused many insurance companies to abandon homeowners. These homeowners are left with few choices for insurance. What choices they do have, often run three to four times more expensive. How will these increases in insurance costs impact housing affordability in 2022?
Paul Corazza, Principal Independent Property Group, Gungahlin Australia
‘Natural disasters will continue to play a role in the affordability of insurance and housing affordability. It’s important to understand what can happen to your mortgage if you’re displaced by a natural disaster, as well as how to prepare for pending disasters.
“For insurance purposes, consider a multi-year policy that covers a variety of risks. You may also want to purchase supplemental coverage that includes inflation protection and decreasing value exclusions”
Tom Cafarella, a real estate investor, broker owner & founder of Ocean City Development in New Jersey
“Natural disasters raise insurance prices, and with an economic crisis going on, it will make it nearly impossible to afford houses”
13. Will we see any changes in migration patterns or working from home?
Michael Nourmand, president of Nourmand & Associates in Los Angeles, CA
“After over a year of working from home, the office is back and people don’t want to live far from their job. This will result in buyers factoring their work commute in to their buying process. Interest in outskirt neighborhoods like Encino and Calabasas will decline as more people seek to work closer to offices, which are typically in central LA.
Conclusion – what we should expect for 2022
Well there you have it, fifteen different real estate professionals and what their crystal ball is telling them. Of course, no one of really knows, but it seems like the consensus is clear. Governments will have to raise interest rates to stave off inflation. Home inventory is low, and demand is still strong, but expect a slight slow down toward the end of 2022.