With one spectacularly unique year coming to a close and the start of a particularly uncertain year looming, the National Association of REALTORS® (NAR) held a virtual Forecast Summit bringing together a swath of experts to hopefully provide both perspective on the wild ride of 2021 while shining a light on the opportunities and challenges of 2022.
Featuring insights from dozens of economists and industry insiders, NAR Chief Economist Dr. Lawrence Yun and Vice President of Demographics and Behavioral Insights, Dr. Jessica Lautz, led discussions and presentations looking at data, projections and insights on everything from long-term demographic-driven trends to current federal legislation to racial gaps in equity and homeownership.
“2021 has certainly been a year unlike any other—what will 2022 bring?” asked new NAR President Leslie Rouda-Smith. “We are here today to look into the future. We don’t have a crystal ball, but much of the success REALTORS® had in 2021 was due to insight.”
In the shadow of rocketing inflation and a housing market that was severely restricted by supply-side limitations, the speakers quickly highlighted the top-line concerns that real estate professionals should be looking at next year.
“One thing we already know about next year is our country’s inventory shortage and the resulting affordability crisis will still be acute,” Rouda-Smith said.
According to Todd Richardson, who heads up the research division of the federal office of the United States Department of Housing and Urban Development (HUD), the country is between 5 to 6.8 million housing units short going into 2022, many of them concentrated in the affordable housing sector.
“The pandemic has made that problem worse,” Richardson said. “To solve that requires innovation and out-of the-box thinking. It also requires knowing what is going on.”
Other high-level predictions from Yun and other economists surveyed included home prices rising around 5% and mortgage rates climbing to around 3.7% by the end of the 2022, along with unemployment falling only slightly from the rate of 4.2% it sits at now.
For this last metric, though, Yun warned that many states still are well below the number of jobs they had pre-pandemic as people have dropped out of the workforce, meaning some of the optimism coming out of those broad unemployment numbers could be misleading.
Richardson and others spent some time speaking about programs in the currently proposed Build Back Better bill, which remains jammed up in the Senate. Billions of dollars for first-time homebuyer support, the Low Income Housing Tax Credit, zoning reform and rental housing vouchers could all help alleviate these pressures, according to Richardson and several of the other experts.
“There’s a lot of regulatory changes and movement happening and I would encourage REALTORS® to be a part of that,” said Andre Perry, a fellow at the Brookings Institute.
Discussion of the Build Back Better housing programs—which NAR and numerous other housing advocacy organizations have zealously lobbied for—sparked a lively political discussion in the virtual chat, which was locked early on in the panel.
Ken Johnson, a former real estate broker and professor at Florida Atlantic University, was less optimistic about price growth.
“I do think some markets are significantly overpriced at this time, but most are not as overpriced as they were 15 years ago. So we’re going to get a mixed bag result,” he said. The effect around the country will not be uniform.”
Johnson highlighted Miami, Florida, as a metro with relatively accurate price growth by underlying measures, while calling out Detroit, Michigan, as an area that was likely overvalued in the medium- to long-term.
As far as regions, Yun also highlighted ten “hidden gems” where he expected a hot market in 2022, with nearly every single one of these areas in the South.
These towns were centered on Fayetteville, Arkansas; Knoxville, Tennessee; Spartanburg, South Carolina; Dallas-Ft. Worth, Texas; Huntsville, Alabama; Daphne, Alabama; San Antonio, Texas; Tucson, Arizona; Pensacola, Florida; and Palm Bay, Florida.
The Big Challenges
A number of panelists, ranging from government officials to academics, emphasized that without significant regulatory shifts, as far as zoning and funding, there is no realistic way to overcome an inventory and affordability crisis that has been accelerated by the pandemic.
“For those REALTORS® who live in expensive coastal cities, we are on an unsustainable track as far as housing price appreciation,” said Issi Romem, a fellow at the UC Berkeley Terner Center for Housing Innovation. “Densify, do not revert to sprawling…that needs to be allowed to happen. You gotta remind people.”
The kind of restrictive zoning that swallows up big tracts of land and prevents any kind of dense building, which is most prevalent in coastal markets, will have to be modified to keep a healthy housing market according to economists and other panelists who spoke. Romen urged REALTORS® to “sympathize” with the ongoing movement to diversify zoning, “even if you don’t like seeing your neighbors get a second story window that can look into your backyard.”
“It’s for the greater good,” he said.
Because a large portion of jobs will still require or encourage people to live physically close to an office or other location (Romem said most metros will have around 30% remote offerings for their labor force), even cities like San Francisco will have to expand housing offerings or end up with “Manhattanization,” where only the ultra-rich can afford to buy anything.
Racial equity was another big topic, with Perry citing a study he had led in 2018 that showed homes of similar qualities in Black neighborhoods are valued 23% less than other neighborhoods, costing Black homeowners $156 billion cumulatively.
Despite this, federal legislation and other trends during the pandemic have given opportunities to address this, according to Perry.
“We saw a spike among Black millennials, particularly Black women, purchasing homes,” he said. “People were able to save more, people were not using their discretionary income for bars and clothing and such.”
A pause on student loan payments was also helpful, he added, but a lack of intergenerational wealth continues to hamper prospective Black homebuyers.
Other large term demographic trends that will affect real estate include a huge drop in the birth rate and marriage rate, according to Lautz. In 2021, 31% of households had a child in the home, compared to 58% in 1985.
This so-called “baby bust” could have extremely broad implications for the real estate market, with families less likely to move, upsize, downsize or renovate based on the life stage of their children.
“All those factors are removed,” she said.
At the same time, prospective buyers still are very much interested in having a real estate agent “who they trust, is honest and will help them navigate” the home-buying process, according to Lautz, with a survey showing 87% of potential buyers would prefer to have an agent of their own rather than work with a seller directly or a builder.
iBuyers were “a statistical 0” as far as that data, according to Lautz.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to jwilliams@rismedia.com.
