It’s safe to say that 2021 has been a tumultuous year for the real estate industry. And that might be putting it mildly. From a scorching hot market with limited inventory leading to astronomical prices and bidding wars, to supply chain and labor shortages creating obstacles for new homes nationwide, the industry has had its fair share of ups and downs.
Yet, as the year is winding down, it’s a good time to pause, reflect and prepare for the New Year. While it doesn’t necessarily look like smooth sailing, experts predict that the housing market will start the gradual process of balancing out in the months ahead. Many expect to see the market — however slowly — returning to something that looks a little more “normal.” To help you keep a pulse on the industry, we’ve compiled a list of five real estate trends to watch as we head into 2022.
Slower Price Growth
If there’s one thing that experts across the industry agree on, it’s that we should see less drastic price hikes in 2022. But what that growth rate will look like is still up for debate. Freddie Mac, for example, projects the house price growth to increase by 7%. Fannie Mae is in the same range, projecting a 7.9% increase, while CoreLogic projects a more modest 1.9% increase.
Rising Mortgage Rates
Due in part to the staggering inflation rates — which hit a 30-year high in 2021 — along with high demand, many experts including the Mortgage Bankers Association predict mortgage rates will rise in the new year. The rate of increase may be more gradual, inching up over time, rather than a sharp, dramatic increase. For example, according to a recent report, the MBA expects mortgage rates to average just over 3% in early 2022 and rise to 4% by the end of the year.
Unfortunately, many experts also expect a rise in foreclosures to continue in 2022. In June 2021, the nationwide foreclosure ban, which was implemented in response to the pandemic, expired. Since then, foreclosures have been on a slow but steady climb through the second half of 2021. With over 2 million homeowners behind on mortgage payments, the numbers are expected to increase well into 2022.
Construction Labor and Material Challenges
While there may continue to be a booming demand for homebuilding, supply chain issues and labor shortages are likely to continue impacting construction. The costs of construction materials — especially lumber — have yo-yoed throughout 2021, peaking in the spring at $1,515 before falling back down in late summer, only to increase again in the third quarter. Exorbitant costs, plus a dearth of skilled laborers are expected to continue presenting professional and DIY homebuilders unique challenges in the year ahead.
Lead Prices Stabilizing
After a rollercoaster of a year, the costs for digital lead prices are starting to stabilize. Many Southern cities, including Atlanta and Houston, are seeing lower lead costs this quarter, while other markets along the West Coast are still high, according to a report by software company CINC. However, costs are expected to go down and even out across the board in the months ahead. This is great news for real estate agents and sellers looking to maximize digital search and save on lead generation spending.
We know that navigating a new year full of new surprises — hopefully, more of the good kind than the challenging — can be quite the task. But staying tuned in to expert projections and real estate trends can help you prepare for the months ahead. As a customer-service-focused appraisal management company, our mission at MVS is to make sure lenders, brokers and appraisers have the tools and resources they need to succeed. Learn more about how we support the real estate industry and let us know how we can help in 2022.