It’s a thrilling market for sellers at the moment. Get a head start on the future of the real estate market [2021-22] in this report we've compiled with the help of industry experts.
More than a year since the start of the pandemic and the resilience in the housing industry is remarkable. Double-digit home appreciation, low mortgage rates, and the growth of the economic confidence index are things that could not have been predicted.
Homes are selling at lightning speed. In March, the average days on market for properties was just 18 days, down from 29 days in March 2020, according to the National Association of Realtors.
Bidding wars are also up — nearly two-thirds of offers written by Redfin agents in March faced competition, up from 45% in April 2020, according to the brokerage.
The ongoing shortage of homes for sale in the US is the reason to blame. According to the NAR report, unsold inventory sat at a paltry 2.1-month supply in March, while a balanced market usually has four to six months of home supply.
Lawrence Yun, NAR’s chief economist says, “The market is hot pretty much everywhere and across all price points. The only area where there is sufficient inventory is in $1 million-plus homes, but that only represents about 5% of the housing market.”
In a nutshell, it’s a thrilling market for sellers at the moment. And this is just a glimpse of what lies ahead.
To get a head start on what's in store for the future of the real estate market, read more about the 2021-22 real estate trends and housing market predictions that we have compiled below.
Housing Market Forecast for 2021-22
1. Number of Homes Sold
The most visible trend defining the housing market in 2021 is a striking scarcity of homes amidst robust demand.
Lawrence Yun, NAR's chief economist says, "Supply has modestly improved in recent months due to more housing starts and existing homeowners listing their homes, all of which has resulted in an uptick in sales. Home sales continue to run at a pace above the rate seen before the pandemic. At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year".
Existing home sales stand at 5.86 million in June 2021, recording a 1.4% month-on-month rise. This is the first rise in five months as compared to the forecasts of 5.9 million.
Talking about the future of the real estate market, Zillow forecasts 6.4 million home sales in 2021. This is a 13.5% hike from 2020 making it the strongest year for residential real estate sales ever since 2006.
2. Home Prices
It is no secret that in most US cities, housing prices floated upwards throughout last year and into 2021. According to Zillow, about 1 in 4 homes sold above the mentioned listing price, indicating a competitive market.
Realtor.com’s data shows that the national median list price is currently $385,000, a whopping 13% YoY growth. The lack of housing supply has pushed home prices to greater heights.
In fact, the most significant median list price increases in April came from Austin (+39.8%), Buffalo (+28.3%), and Los Angeles (+24.8%).
Matt Curtis of the Matt Curtis Real Estate team in Huntsville, Alabama, commented, “Home valuations here just keep climbing. It’s Econ 101: there’s simply not enough supply to keep up with demand.”
Another factor for increasing prices in the market is that someone is always ready to pay a higher price. And sellers know that.
Kaitlin McLaughlin, a San Francisco-based real estate broker, commented, “People think, ‘if the comps say my house is worth $300 a square foot, I’ll hike the house value by 25 percent because I can—or I think I can. That can kill the market fast.”
According to Zillow, increased housing demand, heightened home sales activity and proceeding price appreciation, as a result, is just the beginning. In the future of the real estate market, these trends are likely to stay, even as the pandemic begins to recede.
3. Hot Markets
Earlier this year, we did careful research and analysis of the upcoming housing market trends. Among the top 8 real estate markets in the US in 2021, Raleigh, North Carolina, Sacramento, CA and Austin, Texas ranked the highest on the demand meter.
Earlier this year in March, Realtor.com reported a 50% decline in new homes inventory compared to the past year.
One crucial factor for low inventory is the increasing speed at which homes are sold. Realtor.com reported that it takes less than two weeks for 50% of homes to go under contract for sale.
According to The Mortgage Bankers Association (MBA), single-family housing is expected to hover around 1.134 million. And that’s just the beginning. By the forecast, the future looks brighter with new projections at 1.165 million single-family homes in 2022 and 1.210 million in 2023.
Even then, supply constraints are still expected to be there in the US real estate market in 2022, and experts say that it won’t get resolved anytime soon.
5. Days on Market
Right now, it takes an average of 25 to 45 days from listing to contract and a rightly priced home will garner multiple offers. The average days on market in the US was 39 days in May.
Another reason for an increase in time on the market is affordability since longer periods of home price growth over the past 12-18 months have left some locations out of reach for some buyers.
10% of all U.S. homeowners will list their homes in the next 12 months, Realtor.com market trends predict. An increase in days on the market will continue to proceed in 2022 due to lesser competition and more inventory.
6. Mortgage Rates
During this year’s start, the average rate for a 30-year fixed mortgage loan drastically lowered to 2.65%. It was the lowest weekly average in 50 years, making this one of the reasons for rising demand among home buyers during late 2020 and into 2021.
The research team at Freddie Mac, earlier this year, wrote: “As expected, mortgage rates continued to inch up but are still hovering around three percent, keeping interested buyers in the market.”
The Mortgage Bankers Association predicted differently for 2022 in a recent forecast. The report suggests that mortgage rates will be higher in the future, even higher than the astoundingly low rates during the first week of January 2021.
A report from Money.com also confirms that mortgage rates are likely to steadily climb throughout the near future of the real estate market.
Rates are likely to be around 3.5 - 4% in 2022 as ‘tapering’ will soon be done by the Federal Reserve in order to curb the purchase of Treasury bonds and other securities.
7. Rental vs. Buying
In 2021, homebuyer demand remains strong amidst steadily increasing mortgage rates. In fact, millennials prefer buying a home more than ever.
According to a trends report from Realtor.com, buying precedes renting in 15 of the country’s 50 metro areas, but renting is comparatively profitable.
Rental prices have an edge over home prices in the sense that while rising at a slower rate, renters have time to save.
Record high home prices, rise in mortgage rates and lessening affordability may increase prospective buyer’s appetite for rent.
Home Buying Institute agrees: “Overall, home-price appreciation has outpaced rental increases over the past year. This means that more and more housing markets are starting to favor renting over buying, for cost-conscious residents. This trend could continue into 2022 as well, especially if home values continue to climb steadily as expected.”