The real estate market is one of the most popular when it comes to investing. It is a highly profitable business that is constantly evolving, and that year after year provides greater financial benefits for those who decide to put their money into it.
Of course, going into real estate works like any other profession. You must spend time managing your investment portfolio, building healthy relationships with tenants or buyers, doing promotional and marketing work for your properties, and of course, you have to keep up with new trends.
Investing in real estate is not only based on buying a house and renting it or putting it up for sale… There are many other options that make up this broad market and that makes it one of the favorites by the largest investors in the world.
According to Fortune, homes are now selling faster, at a rate not seen since 1990. According to their analysis, sellers are paid full price for properties, and 35% of them manage to sell for higher than they had thought.
Keeping all this in mind, you need to know what the most popular real estate options are for this year and the movements that will be generated in the market, and that is why we have made a top with the 7 trends in real estate projected for this year.
1. Market conditions are ideal for sellers
The real estate market will continue to present a high demand for home purchases, although it is expected to be relatively lower compared to the last 18 months, when many people took advantage of the drop in home prices in various states, or the opportunities of payment provided by financial institutions in the face of the pandemic.
The projections of the senior economist at the Center for Economic and Policy Research, Dean Baker, indicate that the demand for home purchases will not collapse, and the general price of a home will not decrease either, although there will be local fluctuations.
The Center points to a rebound in demand, particularly in those locations that used to not be a very competitive market, such as areas on the outskirts of cities. All this due to the fact that a higher percentage of the workforce in large cities has greater opportunities to work from home.
According to a consumer analysis, now people are more focused on having larger and more comfortable spaces, factors that are sometimes difficult to achieve in big cities for a really affordable price.
The advice they give to buyers is not to try to predict what the markets will look like in the next few years, as this represents a risk. Even if prices fell, mortgage rates may continue to rise, making home buying just as expensive.
2. Shortage of homes for sale
The housing shortage continues to be a reality in the real estate market, and by 2022 the situation will continue to be very similar. This in turn will generate a constant increase in the price of properties.
According to First American Financial Corporation Chief Economist Odeta Kushi, the high demand has a lot to do with the fact that many millennials are reaching homeownership age, and unfortunately the market is not prepared to respond to this increase in demand, especially after the pandemic.
There are other industries that have complicated the real estate scenario. Supply shortages, including delayed production and distribution of wood, mean that the construction sector faces delays that complicate the completion of large projects.
In turn, this whole situation continues to raise the prices of raw materials, and therefore generates a housing shortage that could continue to worsen over the years.
Let’s remember that no matter what happens, people never stop needing and buying a home. Added to this are the needs of the real estate business, which continues to grow more and more.
3. Many first-time buyers now prefer to purchase what was once known as a “second home”
A second home is usually one located in very quiet cities or counties with very pleasant climates, dwellings spacious enough to bring the whole family together, surrounded by people who lead similar lifestyles, and close enough to other places to have fun.
The concept of that kind of house now makes sense as a first home for younger generations who are nowhere near retirement. A Zillow projection indicates that millennials and Gen Zers will seek out this type of housing as their primary home.
The reason for all this?
Home office continues to be a reality, and many people have even become completely independent from the jobs they had before. In addition, in an increasingly globalized and interconnected world, it is no longer necessary to live in big cities to have access to technology, services, and a life full of dynamism.
Even with that in mind, Zillow’s projection also indicates that a “vacation home” won’t be the only property owned by Gen Zers and Millennials. Being young, they still have time to opt for another type of property that is a little more “traditional”.
According to a Zillow report, long-distance movers moved a higher average of families and individuals to areas with properties valued up to $27,000 less than where they previously lived.
It is estimated that by 2022 this type of internal migration will continue to be a reality.
4. Coworking spaces
The previous trend has a lot to do with this one. Spaces that, instead of functioning as old and boring corporate offices, combine the best of art and modernity with the seriousness that a work space deserves, are becoming more and more popular.
If you are someone who prefers to invest in corporate real estate, rather than houses or apartments, then this could be your year.
According to data from Find Stack, 77% of workers say they are more productive when they are working from home, and this is something that companies are taking into account. Many companies not only offer their workers the possibility of remote work, but have also decided to close their offices and offer them monthly plans in coworking spaces for those days when they feel they need a corporate space to work.
All this has made coworking spaces grow within the real estate sector, and that is why for this year it represents a great trend.
5. Demand requires more space inside and outside the home
New home buyers want larger homes with much more space inside and out. In this case, the pandemic also marked a before and after in trends. Among the needs of the new generations when buying a property now is a spare room that can be converted into an office.
In addition to that, many also want large gardens where they can exercise, walk their pets, meet with friends and family, and much more. All this translates into the need to do as many activities as possible without having to leave home.
Properties with these types of features are in high demand, especially in quiet and spacious suburbs.
According to Realtor.com, searches for suburban homes have increased by 42.1% since the start of the pandemic, while the size of single-family homes has also increased. Census data and analysis from the National Association of Home Builders indicate that the average square footage of single-family homes increased by 6.2% to 2,541 square feet.
6. Increase in interest rates
We have already seen that the Federal Reserve officially increased interest rates, and we must remain very attentive to the movements that may be generated in this index. Ever since the Great Recession, economists in the real estate world have projected interest rate increases.
In 2010, interest rates on 30-year mortgages were around 4.69%, but fell to 3% in 2012. In late 2018 and early 2019, mortgage rates hit 5.34%, then dropped in January 2020 to 3.7%.
By 2022, the interest rate will probably continue to rise, and this is something on which the chief economist of the National Association of Realtors, Lawrence Yun, and the chief economist of the Mortgage Bankers Association, Mike Fratantoni, agree.
If the variants of the coronavirus and the conflict between Russia and Ukraine continue to complicate the economic scenario in the United States, and if inflation continues to rise, these two experts project that 30-year mortgage interest rates could reach up to 3.5%.
7. The average price of a house in the United States will continue to rise
As has been the case throughout history, the average price of a home will continue to rise, and now more so given the high demand for property purchases, and how difficult it has become for the real estate industry to cover the need for millions of people.
By November of last year, Fortune analyst economists indicated that by 2022 the growth of the price of a house would slow down, but already in the first months of 2022 they corrected their projections to include an increase in the value of homes.
Zillow made a similar projection, assuring that by the end of 2022 the price of a house could decrease by up to 11%, but given the recent economic events of 2022, they project a growth rate of the price of a house that exceeds 16.4%.
Now, three months into 2022, Zillow further radicalizes his projection, estimating that the rise in home prices could exceed 21.6%, marking an all-time high.
Given so many movements in the real estate market, it is very easy to worry about buying a home, but it is very important that you do not let uncertainty win you over, as this can only make you take bad decisions.
The real estate market is under enormous pressure, that is a fact. Now what you have to ask yourself is if you consider that this is the exact moment in which you should try to acquire a property.
Investments in real estate will always be a good decision, but you must take into account many factors so that your experience in this world is as satisfactory as possible.
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