After nearly two years of feverish activity in the housing market, experts at Berkshire Hathaway HomeServices say the rollercoaster ride buyers and sellers lived through during the pandemic is coming to an end.
BHHS recently released its Real Estate Report 2022, which forecasts a strong but stabilized housing market this year, deviating slightly from the past two years.
“We’re going to see a similar market to what we saw in 2021, but I do think that units will come down,” Christy Budnick, CEO of BHHS, tells RISMedia. “Not excessively, but we will see a smaller number of units closed in 2022 while volume will probably be largely the same because of the offsets in average sales price.”
At the height of the pandemic, a popular narrative was about mass outmigration from dense urban markets. According to the report, the trend has since shifted as buyers are returning to the metropolitan areas.
This is the case in Boston, as the report indicated that the northeast market saw a significant resurgence of buyer demand and modest price growth. With condos accounting for more than 95% of the city’s homes, Boston saw a nearly 50% increase in transactions in 2021.
The report found similar activity in other cities such as Houston and Las Vegas, which Budnick suggests indicates a more significant shift at play.
“That to me really does offer some interesting proof about what we’re seeing,” Budnick says. “I think that a lot of buyers having escaped the cities during the tougher months of COVID-19 are missing the energy, excitement and melting pot of so many different cultural experiences that the city brings.”
Strong demand coupled with record-low mortgage rate and razor-thin supply contributed to a perfect storm of factors that helped drive home prices up by an average of 18% in 2021.
That’s likely to ease up this year as the report suggested that higher costs for homeownership—rising prices and mortgage rates—have pushed some buyers to the sidelines in some markets as BHHS affiliates indicated that they’d seen a dip in offers per listing.
“Instead of having 12 or 20 offers on a listing, we’re looking at two or three,” said Rei Mesa, president and CEO of BHHS Florida Properties, in the report.
Mesa suggested that price escalations and affordability issues have driven the moderation in offers.
Rising mortgage rates won’t help the situation either.
With historically low rates in the rearview mirror, the report noted that 2022 will likely see rates “remain steady in the 3% to 3.5% range.”
“There are alot of individual buyers right now that are stretching to be able to buy a home in a lower price point within a given area,” Budnick says.
As interest rates creep up, Budnick expects price-sensitive buyers to be squeezed out of the market even more as they compete with institutional buyers willing to make cash offers over the listing price.
Inventory remains a major challenge in the current and future state of the housing market as experts noted that the U.S. still has a 5.5 million to 6.8 million housing unit shortage that must be addressed.
“The two biggest elements that we believe are headwinds are continued issues with supply chains as well as labor shortages,” Budnick says, noting that both are hindering the new construction and resale sectors of the market.
“We’re really getting a double whammy there,” Budnick adds. “Until we start to see that ease up some, I think we’re going to continue to see a very tight supply of homes.”
This year, a silver lining on the horizon could be homeowners coming off the sidelines to reap the benefits of higher prices and strong demand for homes.
Based on a September and October Realtor.com survey cited in the report, roughly 26% of respondents indicated that they would be willing to sell their homes within the year—up from merely 10% in the spring last year.
It’s still early in the year, but Budnick advises agents to lean on their relationships to remain out in front of their competition and continue to produce as the market stabilizes.
“Buyers are worried,” she says. “They’re scared that they are not going to get the home of their dreams or that they can’t compete for a home, so it requires a great deal of trust and education.
“Double down on relationships with your buyers, sellers and your suppliers,” she continues. “If you can have great relationships with people who can make your job better. Make sure you’ve got solid relationships and work on strengthening them so you can be first in line when that roof needs replacing.”
