The recent trends in real estate in the United States have delighted some people and frustrated others. High demand and low inventory have lifted home prices nearly 20 percent over what they were in the autumn of 2020. Again, good news for sellers; a headache for seekers. Yet if history demonstrates anything, it reveals the cyclical nature of the real estate market. This fact will give hope to buyers for the long term but what about the more immediate future? Although winter is not exactly the peak season for residential transactions, it might provide some opportunities for intrepid and informed shoppers.
Yes, home values will continue to rise against other economic pressures, according to an estimation reported by Fannie Mae. The increase will amount to a positive difference of nearly eight percent by the end of 2022. Although home buyers will scowl at this forecast, they can at least be thankful that property value is climbing at a slower velocity than in the prior year. Still, it must be noted that for nearly a quarter-century before these steep increases, values grew steadily around four percent annually. Does this prediction mean a chilly winter for residential real estate sales?
Home Buyer Profiles
The number of first-time home buyers is growing substantially, according to the National Association of Realtors. Young families are in need of housing so forbidding economic conditions will not be enough to postpone a home purchase. Moreover, the age of repeat buyers is also ascending to 56 years of age. Of course, millennials with young children may opt to wait for the spring to resume home searches. On the other hand, many have postponed the process because of COVID-19, and are now eager to acquire a house sooner rather than later. Forbes magazine also pegs this readiness to salary increases and getting a handle on student loan debt.
The Price of Money
Another financial prophecy for the winter months is that mortgage interest rates will go up -- a 30-year fixed rate product is expected to increase by 3.5 percent or so. This can impact monthly cash flow considerably. Yet Fannie Mae sees no housing market damper on the horizon despite these higher rates. Per a Fannie Mae executive: "Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong house price appreciation through at least 2022..."
Is Fannie Mae correct about the supply of sell-able homes in late 2021 and 2022? There is some disagreement about what will happen among mortgage and real estate professionals. Some are counting on new construction and a sell-off by landlords to supplement the present reserve. Others are less optimistic, believing the inventory shortage will only improve at the edges, remaining a chronic problem for some time to come. Granted, savvy buyers know how to navigate a tight market but, in the end, as the old adage goes, you can't get blood from a stone.
Commercial Real Estate
Experts see the commercial market as more robust as business picks up post-pandemic. Industrial and warehouse space will be at a premium, particularly in response to the supply chain disruptions of 2021. Retail and office buildings should see boosts and dips, depending on the region of the country they are in. Meanwhile, multi-family homes and apartment buildings will enjoy high demand among tenants, especially those that are sitting out the still grim residential sales market. Needless to say, the commercial market never exists in a vacuum.