In this article:
This is a follow-up article to one we published earlier this year: Real Estate Markets & Coronavirus: Construction & Home Buying In a Post-Pandemic World.
The real estate market constantly changes. One factor that exacerbated the volatility of the market was the COVID-19 pandemic. We saw unprecedented changes during the opening month of the pandemic:
The rebound continued, and home sales and prices have hovered around historically high rates.
The trends will not continue in 2022. The world is shifting back to normalcy, and the real estate market has adjusted accordingly. As a real estate investor, your livelihood relies on your foresight and ability to capitalize on the evolving market.
What real estate trends will you expect to see in the final months of 2021 and into 2022? Below we outline what's likely to occur and the influences that lead us to our predictions.
What causes a change in the real estate market?
As a real estate investor, you must know the fundamental principles that drive change in the housing market. Once you understand the principles, you will identify trends and adjust your investment strategy to match those trends.
The demographic makeup of the United States affects the housing market. You can use demographic data to answer questions like:
For instance, The National Association of Realtors released a trends report that identified Millennials as the largest share of home buyers. Millennials aged 22 to 40 who are in their peak buying years will migrate out of cities in favor of suburban areas. The ability to work from home, growing family sizes, and the desire to have a yard have driven this suburban migration.
Housing markets generally reflect the overall health of the economy. Loss of employment displaced people and work from home opportunities contribute to an increasingly mobile population. As a result, short-term rentals exploded in popularity because of their flexibility.
Read more here about how short-term rentals are gaining in popularity and make for excellent real estate investments. If you maximize your profits and cash flow, take a look at our strategy guide for real estate investors.
Bankrate's current mortgage interest rates as of October 20, 2021, are:
The increase represents a three-month upward trend from July when rates were 3.04%.
As mortgage interest rates increase, it becomes more expensive to secure a mortgage which lowers demand and prices in the housing market.
On the contrary, it is cheaper to get a mortgage when mortgage rates drop, which increases demand and price in the real estate market.
The Mortgage Bankers Association forecasts a rate increase to 4% for a 30-year fixed mortgage rate in 2022. However, even with a higher interest rate, the MBA predicts the growth of mortgages to buy a home.
The government enacts policies that have short-term and long-term ripples in the housing market. Either state or federal governments may provide homebuyers with:
Be aware of these mortgage policies to stay up to date with the factors impacting the market.
A central government policy that will affect the housing market in 2022 is the end of the moratorium on evictions. On June 24, the Biden administration extended the moratorium until July 31, 2021.
People had until September 30, 2021, to request a forbearance. For some mortgage holders, there is an additional three months of protection. For now, the only properties moving into foreclosure are vacant or abandoned properties. But that is set to change.
If a foreclosure started this minute, it would not resolve until mid-2022. There is a backlog of foreclosure homes that needs addressing before a current foreclosure can process.
As a result, there will be a wave of foreclosed single-family homes well into 2022. The foreclosures create a buying opportunity in local housing markets if you can secure funding or have cash on hand to buy once the backlogged inventory enters the market.
Are you ready to take control of your financial future with real estate investing? If so, read our beginner's guide to real estate investing for incredible tips.
Although the housing market constantly changes, identifying real estate trends maximizes your investment earning potential. Currently, the market favors sellers--demand is high, and prices for homes are even higher. Millennials are moving out of cities and into suburbs, looking for a house and office combo that suits their remote working needs. Your knowledge of these trends will result in smarter investment decisions and a higher return on investment.
Royal Legal Solutions keeps our clients informed of real estate investing trends. In addition to providing valuable insights for structuring a real estate investing business, we guide clients through the process of growing it in a scalable and easily manageable way. To find out if you could benefit from our services, take our financial freedom quiz.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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