What Kind of Market to Expect in 2022 Part 2

At the core of this market is the fact that there is a new generation of home buyers entering this very constricted real estate market with very limited options. So, with high buyer demand, and even higher interest rates, housing will continue to appreciate, but probably not at the trajectory we had become accustomed to over the last 18 months. Currently the interest rate for a 30-year home mortgage stands at 4.25%, which represents nearly a 180% increase in the last 12 months.

It will be interesting over the next two months to see exactly what does occur as we enter the heart of the real estate buying market. These are the months when people have to make those buying decisions based upon jobs and schools for the children.

Some of the experts, which includes the Mortgage Bankers Association, are projecting that 2022 will represent a $1.7 trillion purchase market. A large part of this record demand will be due to the highest median price of a single-family home in history, $350,000. Even though this is a significant decrease from the $3.9 trillion purchase market of 2022, the housing demand continues to be very strong. Some of the demand is also the result of sellers looking to locate to lower cost, lower maintenance housing markets, specifically from the Connecticut New York and New Jersey regions, to North Carolina, South Carolina, Florida and Texas. There is a concern that with the appreciation of homes, the real estate taxes people pay might trigger a new wave of sellers into lower tax states.

Housing Starts
In 2021 it was reported that single-family housing starts hit 1.123 million, which is the highest on record since 2006. As mentioned in earlier blogs, builders are finding the availability of buildable lots in very short supply. It is not just single-family homes that are in short supply but also buildable lots. Builders are also facing historic price increases for lumber and other building materials. There is also a significant shortage of skilled laborers. In some areas, such as Montgomery County, Maryland, 85% of buildable land is already developed.