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The 2022 Winter Housing Market Is Heating Up

The 2022 winter housing market heating up
by Brad Cartier, posted in Newsletter

It’s gearing up to be a warm real estate market this winter. According to Jeff Tucker of Zillow, “the usual spring thaw in the housing market may come much earlier than usual.” A more competitive market than we are used to is in store this winter with high demand and low supply.

Median sale prices - Zillow

Source: Zillow (Dec. 2021)

The Zillow Home Value Index jumped 1.2% from October to $316,368, up a total of 19.3% from November 2020. This is an all-time high in data dating back more than 20 years for annual price growth, and even the monthly pace is higher than at any point recorded by Zillow prior to the pandemic.

Tucker also comments on the heated rental market: “Rents grew year-over-year in all 50 of the nation’s largest metros. Annual rent appreciation was fastest across the Sunbelt, with the fastest growth in Tampa (28.4%), Miami (27.3%), Phoenix (26.5%), and Las Vegas (25.3%). Among the 50 largest metros, annual rent growth was slowest in Minneapolis (5.4%), Milwaukee (6.9%), and Louisville (7.9%).”

Similar data is reported from Redfin last week, where according to Dana Anderson, median housing prices have risen 14.6% year-over-year to $361,171 as of the end of December, while the number of homes for sale has sunk to a new record low.

Median sale price - Redfin

Source: Redfin (Dec.2021)

According to Redfin deputy chief economist Taylor Marr:

“The holiday effect of homebuyers and sellers diverting their time and attention toward travel and celebrations was even more extreme than during the pre-pandemic Christmas week of 2019…We see this slowdown as a temporary consequence of the holidays, and not as an indication that homebuyer demand is backing off. Those who did purchase homes over the holidays paid high prices due to the ongoing supply shortage.” 

Other key points from the Redfin report above include:

  • Pending home sales are up 4.2% year-over-year, and up 55.2% compared to 2019.
  • New listings were down 6.4% year-over-year, but up 15.6% from 2019.
  • Active listings dropped 26.1% year-over-year to an all-time low.
  • 42.1% of homes sold above the asking price, up from 33.6% in 2020 and 19.9% in 2019.

Inflation update

Inflation concerns continue to dominate the narrative as we enter a new year. With the cost of goods and services rising faster than any time since the 1980s, investors are obviously concerned. That said, there are some upsides to inflation for investors, starting with mortgages.

According to Jennifer Streaks of The Street, the obvious outcome is likely higher interest rates overall in an attempt to tame inflationary pressures. That said, interest rates will likely still remain low by historical standards, and “inflation could allow borrowers to pay lenders back with money worth less than when it was originally borrowed, which benefits borrowers.”

That is, any money borrowed at today’s value will get eaten away over the years through inflation. This has a positive impact on your long-term debt service and real estate assets holding historical debt.

Inflation tends to be positive for real estate, but Brooke Sample of Bloomberg reports that the housing market may be undergoing another fundamental shift that can’t be explained by rising inflation: regional migration. “It’s hard to say whether this move toward remote work has staying power. But the early signs are encouraging. If the trend persists, the U.S. could see a reversal of one the most punishing developments of the last few decades — and a rise in the productivity and standard of living for lower-skilled Americans.” The move to secondary and more rural markets will only add to inflationary pressures already being felt by buoying already hot real estate markets.

Finally, a new survey from Redfin shows the impact of inflationary fears on the housing market.

  • 73% of buyers and sellers say inflation is influencing their buying or selling plans.
  • 29% said they’re delaying homebuying plans due to inflation.
  • 24% said they are moving up their homebuying plans.
  • 11% are canceling their buying and selling plans altogether.

Impact of inflationary fears on housing - Redfin

Source: Redfin (Dec. 2021)

In commenting on the survey, Redfin chief economist Daryl Fairweather noted:

“The way Americans interpret news about rising prices can have a variety of effects on their financial decisions, including homebuying…Some people may delay buying because they’re worried that with prices rising on everything from food to fuel, now is not the right time to make a huge purchase. But others might move faster to find a house because they’re worried home prices and rent prices will increase even more, and they want to lock in a fixed payment.”

Hottest 2022 markets

ATTOM Data Solutions released its Q4 2021 U.S. Home Affordability Report showing the top counties with a population of at least 1 million that are more affordable than their historic averages. These counties included New York County (Manhattan), NY; Montgomery County, MD; Cook County (Chicago), IL; Santa Clara County, CA, and Fairfax County, VA.

Most affordable counties in the US - ATTOM

Source: ATTOM Data Solutions (Dec. 2021)

Danielle Hale of outlined their predictions for the hottest markets of 2022, noting that the allure of smaller markets and the suburbs will continue to drive the top markets in the new year.

Top markets for growth in 2022 - Realtor

Source: (n.d.)

Marc Rapport of The Motley Fool continued with the hot market predictions, noting that most markets saw double digit growth last year, but there are a few standouts heading into 2022 due to strong residential growth that supports retail and other sectors. Those markets for 2022 are: Austin,TX; Phoenix, AZ; San Jose, CA; and Boise, ID.

Finally, Redfin outlined their top markets for 2022, reporting that “Eight of the places on the annual top 10 list are in Florida, which is luring scores of house hunters in search of sunshine, low taxes and more affordable housing. Retirement communities surrounding Sarasota, in particular, are seeing growing demand from young homebuyers who have been priced out of other areas and from remote workers coming in from out of state.”

Hottest markets for 2022 - Redfin

Source: Redfin (Dec. 2021)

That said, the majority of these markets face risks from storms, flooding, and heat, according to Redfin.

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