It’s hard to argue that 2021 wasn’t a solid year for real estate. Agents and brokers have stayed busy as a feverish market carried on. So with the year nearing its close, many are asking what is next for real estate in 2022?
Brian Buffini, founder and chairman of Buffini & Company, had a few ideas at this year’s “Bold Predictions: 2022 Real Estate Market Outlook,” on Dec. 13.
“By this time next year, it will be a changed real estate landscape,” he said during the virtual event.
Buffini kicked it off by focusing on the state of the market, unpacking a few key data points he has been keeping an eye on, including the surging growth of REALTORS®—now 1.52 million members.
“We have more agents in the NAR than ever before and almost that same number of people with a license not affiliated with NAR,” Buffini said.
He also noted that experience among agents has dropped from nine years in 2019 to eight in 2020, a shift that he indicated could pose a significant change to day-to-day business in the industry.
Buffini shifted the webcast to an interview that focused on a more holistic view of the economy with Dr. Lawrence Yun, chief economist and senior vice president of Research at the National Association of REALTORS®.
While Yun noted that the unemployment rate had reverted to its pre-pandemic levels, he suggested that total jobs paint a more comprehensive picture of the work that needs to be done as the pandemic rebound continues.
“The unemployment rate is about the same, but we are still short by four million jobs,” Yun said, attributing the number to various factors, including stimulus money incentivizing workers to stay out of the job market as they looked for higher-paying opportunities.
Looking at the real estate’s performance heading into 2022, Yun stated that the multiple-offer frenzy that took hold in the spring of this year had died down with homes on the market a bit longer than before—albeit they are still selling fast.
He indicated that the market is beginning to see “a mini-surge,” as autumn and winter could be the second-best market in the past 15 years—2020 was the best following the lifting of national lockdowns after the pandemic.
“People rushed to buy homes during the pandemic, so two straight years of spectacular performance,” Yun said, pointing to a 7% increase in home sales from 2020 to 2021—from 5.7 million to 6 million, respectively.
While home sales have shined over the past two years since the start of the pandemic, Yun said 2022 is poised to be slightly different.
“I think the sales activity will be shaved modestly,” Yun said, suggesting a 2% reduction in sales next year as mortgage rates increase.
A silver lining on the horizon will be improvements in inventory, with the industry “turning the corner” on the dire shortage of housing supply for sale, according to Yun.
“New construction of single-family homes has been moving steadily higher,” he said, indicating that the market may see more inventory in the spring market next year than in 2021.
Yun also indicated that more people are likely to list their homes now that federal support and mortgage forbearance programs are either ended or are slated to end next year.
Even with a much-needed injection of inventory, Yun noted that agents should prepare for the rising mortgage rates to push activity forward next year as buyers try to secure the lowest rates possible before they climb to 3.7% by the end of 2022.
The current trajectory of inflation poses a challenge for agents, according to Buffini, who followed Yun’s predictions with a few of his own.
With core inflation just under 5%, Buffini indicated that demand for real estate would tick up as people look to hedge against higher inflation, resulting in heavy competition through the summertime.
First-time buyers will be the most impacted cohort of buyers in the market next year as rates creep up.
“Those first-time buyers are eventually going to reach a cap because of inflation and a slightly increased interest rate,” Buffini said, adding that agents will likely see a mid-year slowdown in entry-level and “move-up” housing market activity.
“Then what you’re going to see is that because the first-time buyer cannot go as far as they were going, you’ll see less over-the-top multiple offers,” Buffini said.
High-end real estate will be the last to change, as Buffini forecasted that sector of the market to “continue to zoom all year long.”
“If you have someone in the pipeline and they are rate sensitive, you’re pushing them hard,” Buffini said, noting rising mortgage rates will taper runaway price increases and stymie what buyers can qualify for next year.
Both Yun and Buffini concluded their forecasts with a warning to agents—particularly new agents—of another challenge ahead of them in the coming year.
“If you look at the total number of homes sales and the total number of agents, it implies that not everyone will succeed,” he said, while also expressing his admiration for “the entrepreneurial spirit” of many members entering the industry.
Buffini’s general advice to agents was to focus on the fundamentals and take advantage of the upcoming business in the winter and summer.
“I know people are working as hard as they can, but there is an old phrase that even a turkey can fly in a hurricane,” Buffini said. “When the wind starts to slow down, if you’re a turkey up at 200 feet, you’re going to be Thanksgiving dinner.
“There are going to be a bunch of people getting out of the business, and we are going to be left with even less experience in the industry,” he concluded.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to firstname.lastname@example.org.