2022 Real Estate Market Trends Investors Need To Know About

Over the last two years, the housing market has been subject to a variety of unprecedented stresses such as the pandemic, economic stimulus bills, the eviction moratorium, and more recently historic levels of inflation. 

In spite of this, the outlook for the real estate market has remained relatively positive. Many investors are realizing large capital gains and with demand at an all-time high landlords are experiencing historically low vacancy rates and rent growth. 

For 2022 and into 2023 market experts expect many of the real estate market trends seen to date to slow down but continue. The continued shortage of houses will see home prices in many places across the US increase, and it’s expected that renter demand will remain high. In this article, we take a closer look at a few of the key real estate market trends for 2022 that investors need to know.

2022 Real Estate Market Trends

1) Home prices will continue to increase

Home prices have seen a big increase over the last two years and leading industry experts expect this trend of appreciation to continue. However, most are predicting that this increase in home prices will stabilise and slow down over the coming months.

Realtor.com predicts a 2.9% increase in home values over 2022. Zillow, on the other hand, has a much more optimistic outlook and predicts home price increases of up to 11%.

These increases are going to be driven by the high demand and low stock availability. It will remain a seller’s market. New builds because of supply chain issues and the freeze during the pandemic simply cannot keep up with demand and increased pressures.

2) Rent demand will continue to increase

The same low stock availability and high demand that is driving home appreciation is also resulting in an increase in demand for rentals. Many who would normally be looking to purchase first-time homes have been prevented by recent events, whether that’s unexpected costs associated with the pandemic, or simply being outbid by home buyers with more capital.
This increase in demand for renters is predicted to keep vacancy levels low and Realtor.com predicts an increase in average rent amounts of as much as 7%.

3) Vacancies to remain low

Over 2021 Landlord Studio’s data of over 30,000 units across the US saw an average vacancy rate of 4%. Broader market data suggests averages may be slightly higher for some landlords hovering between 5.7% and 6.8%. Either way, this is a marked improvement on previous years and with the trend of high renter demand and low stock availability, it’s likely these vacancy rates will continue to stay low.

4) Small portfolio landlords will be hit hardest

Despite the fact that many market factors are looking positive for real estate investors the past two years have shown us that events are unpredictable. The lingering effects of the pandemic alongside the lengthy eviction moratorium, and other market factors such as high inflation rates have meant that outstanding rent arrears are still a problem for many. For smaller portfolio landlords the impact is more severe and many will be considering consolidating assets and realizing gains after the recent record appreciation.

5) Renters will look for more space

As already mentioned, would-be home-buyers are being forced to rent for longer. However, as this demographic ages, many are starting families and need additional space. Add to this the normalization of working from home, and the more affordable larger properties further from city centers quickly begin to look very appealing. Essentially then, renters over the coming months (or even years) are going to prioritize homes with room for an office, and outdoor space, as well as looking for family-friendly locations. Naturally, renters want more space after going through COVID lockdowns.

6) Demand for short-term rentals will grow  

Short-term rentals suffered through 2020 and 2021. In 2020, for example, demand for short-term rentals contracted by a huge 16.1% for the year. The pandemic stopped people from going on holiday, it stopped people from moving about.

However, as we move out of the pandemic people will become more comfortable moving freely and once again heading on vacation. As such, we predict a rise in demand for short-term rentals over 2022 and into 2023 which is good news for investors who have held onto their short-term rentals throughout this difficult period.

Colorado Housing Market Forecast

Denver has seen a meteoric rise in home prices which has elevated the Mile High city into the top tier of cities across America. “Denver has seen an influx of people, corporations both large and small, and boasts an amazing lifestyle that has all contributed to tectonic-like positive pressures on the real estate market” stated Shaun, a Denver real estate expert and home buyer based in Denver, CO. “I believe we have witnessed a fundamental shift in what Americans want that includes lifestyle. This shift has put enormous upward pressure on house prices, shrunk inventory to next to nothing, and left many real estate experts wondering how high prices will go. My crystal ball tells me that in a tie the market will cool off and my real estate forecast for the Denver housing market suggests a potential contraction in 2024. Nothing like the great recession though. Despite this, I still believe now is a great time to buy a house in Denver, you just need to buy smart.”

Final Words

Whilst experts predict a slowdown of the real estate trends we have seen to date, they do expect current trends to continue. This is good news for real estate investors who have managed to weather the storm of the last few years as increases in demand will lead to further increases in rent prices and continued trends of high occupancy rates alongside excellent home price appreciation growth.

Useful Resources

5 Predictions for the Housing Market in 2022. Marketwatch.com

Expert Predictions for Real Estate in 2022. Forbes.com

Housing Market Predictions 2022: Will It Crash or Boom? Ramseysolutions.com

 

 

 

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