Similar to our inability to predict the real estate rollercoaster we've been on the last two years, antcipating the future still proves challenging. Luckily some data is emerging that may add guidance to your real estate decisions this year.
Cutting to the chase, the 3 most-asked questions in the past 2 years finally have some answers:
- Will a looming foreclosure wave crash home prices (no)
- Will home prices be headed downward anytime soon (no)
- Can I overprice my home since there's an inventory shortage (still, no)
To help navigate the beginning of 2022, I've bullet-listed trends and observations gathered from industry forecasts and professional experience. Buying and selling real estate is always location-specific so please reach out to review your particular goals and questions.
MARKET OBSERVATIONS
- The market will be competitive through 2025, then we'll have a relatively soft landing.
- Inventory imbalance is still a challenge. Most of our local counties have less than 1/2 a month of housing inventory - the lowest we've ever experienced. (A balanced market has 6 months worth of inventory.)
- 2021 saw an average home price increase of 10% in Pennsylvania . Those price increases were significantly higher in the local 5-county area.
- The 2022 forecast for home prices across the state of PA will average 3.5% price growth.
BUYER TRENDS
- Buyers continue to migrate to the suburbs (more affordable, more space than urban areas).
- Rising interest rates will slow down home price increases. Some buyers will need to adjust for a lower purchase price, or wait until wages have increased.
- Remote work options make PA a perfect location choice. PA is still close to NY, DC, and Baltimore for those who don't have to commute to the office everyday. Our location (the keystone state!) also makes job changes easier without the disruption of relocation.
- PA trends are strong for incoming buyers from NY and DC.
- There is hope that we'll see more resale homes become available this year. Homeowners who have been reluctant to move due to covid concerns have now become accustomed to living with covid in the world, which may result in more housing inventory.
SELLER TRENDS
- Home are selling fast. Most homes in the 5-county area sell within 7 days, with a closing timeline of 30-45 days.
- Overpricing slows down home sales and results in a lower sale price. Set realistic pricing goals. Proper preparation and marketing will produce a quick sale.
- Know where you're moving to next and have a plan of action, some options:
- Purchase your next home before selling your current home
- Consider renting or crashing with family/friends. (This market is still not home-sale contingency friendly)
- Bridge loans
- Live in an RV between homes (yes, I do have clients who have done this successfully)
- Request a rent-back as a condition of the sale of your current home (there are drawbacks to this approach)
INFLATION, RENTING, INTEREST RATES
- Inflation will result in rents continuing to rise. Rents are forecasted to increase 7.1% nationwide. If you're a renter, it might be more strategic to move to a fixed rate mortgage if you can put together the down money.
- Mortgage interest rates are forecasted to increase to approximately 3.6% by the end of the year.
- Adjust your home search price range to allow for interest rate increases by the end of the year.
HOUSING TRENDS
- The pandemic has spurred a desire for:
- homes in quiet neighborhoods. Realtor.com has noise overlay maps when reviewing neighborhood maps
- more space (inside and outside)
- flexible space for multi-generational living
- more space to host extended family
- dedicated space for home schooling and home offices
- private backyards, patios, and porches
- Open floor plans are still important but buyers want the ability to close off those spaces for privacy.
- Household growth is slowing, with more homes being built in the future, this might ease the severe inventory shortage in a few years.
MULTIFAMILY AND RENTAL UNITS
- Rents are increasing at a double digit pace.
- Rent increases match the local purchase patterns (suburban rents are increasing faster than city rents).
- If you own rental units, review your current rents.
NEW CONSTRUCTION
- 2022 new construction is picking up a little but it's not enough to keep up with market demand.
- We had 5.2 million less homes built in the past decade due to the 2008 real estate market shakeout.
- US new construction is mostly in the South and the West where there is more land.
- PA new construction is mostly in the PA suburbs, typically 1 hr from the city center.
FORBEARANCE / REOs
- Forbearance and the end of the eviction moratorium won't change the inventory shortage or home prices much. Most sellers have equity in those properties which gives them options such as selling via a short sale. A large wave of foreclosures is not expected.
SENIORS
- Seniors are not downsizing because of rising costs. They'll need to move further away to downsize the house and/or the costs of moving. Most don't want to be displaced out of their lifelong communities.
- In some situations it's more cost-effective to modify their current home than to move.
SECOND HOMES
Please reach out if you have questions. For over a decade I've helped sellers and buyers negotiate real estate in the Greater Philadelphia area, including Montgomery, Bucks, Chester, Delaware, and Berks counties. Having lived in 4 of the local counties, I am prepared to help my clients navigate their options.
REALTOR
Certified Residential Specialist (CRS)
Accredited Buyer's Representative (ABR)
Short Sale and Foreclosure Resource Certified (SFR)
Compass RE
4 E Montgomery Ave
Ardmore PA, 19003
