The past two years have been anything but “normal” for real estate investors, and many have learned to adapt or fear missing out.
Several factors converged to create the “perfect storm” for a competitive real estate market leading into 2022. Low interest rates made homeownership more attractive to more buyers, and the low inventory helped elevate prices. The pandemic continued to impact the market in several ways, including an increase in working from home, an eviction moratorium, and a supply shortage.
Of course, while we don’t have a crystal ball, all the signs indicate the real estate market is inching toward “normal” as it appears nationally, we are back to pre-pandemic levels.
Many real estate investors and construction companies are breathing a sigh of relief and hoping that the period of multiple offers, contingency waivers, and record-high prices are finally in their rearview mirror in many of the hot spots.
From our view within the lending sphere, several assumptions and market trends indicate that the ‘wild ride’ is finally slowing down.
Those trends include:
- Housing starts: According to Mortgage Bankers Association (MBA), single-family housing starts are expected to reach nearly 1.17 million in 2022 and 1.21 million in 2023.
- Home prices: “Many of the buyers who were either forced out or simply sat out 2021’s breakneck housing market will be entering the 2022 market,” Arnold says. “Although they will have more inventory to choose from, it’s projected that housing prices will not drop, but simply appreciate at a slower clip in 2022.”
- Foreclosures: According to ATTOM Data Solutions, the third quarter of 2021 saw significant increases in foreclosures, with a 34-percent uptick over the second quarter. “Although volume is still low, foreclosures will likely continue to creep up in 2022 as more and more homeowners exit forbearance programs,” Arnold says.
- Mortgage rates: The Mortgage Bankers Association predicts that rates will rise steadily during the year, averaging 3.3 percent in the first quarter and hitting 4 percent by year-end. Perhaps signaling a significant drop in originations, especially refinances.
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