|
Real estate markets in 2021 showed historic gains as prices soared on low inventory.
Looking ahead, these six drivers will impact housing markets in 2022. Population Shifts The trend toward the south and the intermountain west accelerated as employers became more flexible with work-from-home options and higher-ed has expanded online learning. Migration that favored large urban centers with high concentrations of employment and education is now leaning toward recreation, tourism, and open space. Materials and Labor Shortage Lumber prices shocked the real estate world in the spring of 2021. Now, steel prices are setting records and materials are in a rolling shortage. On the employment side, 23% of employees are expected to change jobs in 2022. Key people and key materials remain in short supply and working out supply logistics will take time. Capital Expansion Rising stock markets and rising real estate values coupled with direct capital infusion from federal government stimulus means there is more money than ever circulating in the economy. This expansion of capital is searching for investments. Unfortunately, every time capital is placed in the stock market or the real estate market, a seller has capital returned that needs to be re-invested. This is driving prices up and returns down. Interest Rates Both short-term and long-term interest rates will be determined by Fed policy. Expectations are that Fed stimulus will be withdrawn and short-term interest rate increases are imminent. If these actions slow the economy or impact employment gains in California, New York, or Illinois, expect the Fed to pump the brakes and resume more accommodative policies. Inflation Along the I-15 corridor, more demand, materials and labor shortages, more capital to invest, and low interest rates mean higher real estate prices in 2022. While the CPI hit 7% for December, housing measured only a 4% increase while home prices rose over 20% in most markets in 2021. Inflation is higher than reported. Affordability One of the most difficult real estate challenges is affordability. It is compounded by rising home prices and limited supply. Affordability can be improved by rising wages, falling home prices, or lowering interest rates. In 2022, wages, home values, and materials are all expected to rise. It is a challenging time for housing affordability. Conclusion While we won’t solve the affordability problem in 2022, we do know that over a lifetime, owning beats renting consistently. Long-term housing stability and closing the wealth gap in the United States both point to home ownership. For more information please visit https://erabrokers.com/research/ Comments are closed.
|
RSS Feed