With real estate professionals gearing up for another strong year, two of the industry’s leading experts dove into the most significant economic and regulatory issues on the horizon and their implications for the real estate market, during RISMedia’s Real Estate’s Rocking in the New Year on Jan. 6.
Last year saw record-level activity on home prices and mortgage rates. Still, it also left several challenges facing the housing market this year.
During the virtual session “The Economy: Where Do We Stand Now…And What Lies Ahead?,” Dr. Lawrence Yun, chief economist for the National Association of REALTORS®, laid out his predictions for the housing market as the economic recovery continues amid the pandemic.
“The economy is expanding,” Yun said. “Every passing month we are generating new jobs.”
While Yun indicated that recent job growth has been lighter than previous months, he said conditions in the labor market are improving monthly, which is a good sign for the broader economy.
“Nonetheless, the job improvement is implying one thing for the housing market: the rental demand has certainly picked up significantly,” said Yun, adding that there has been a 5% uptick in rents as a result.
Rising rents, coupled with elevated inflation, will likely motivate more people to enter the home buying market in the future as a hedge against inflation, according to Yun.
“In a rising inflationary period, particularly where it really hurts rising rents, it will motivate some of the financially well-qualified renters to consider buying a home,” said Yun. “That is why I believe that the spring homebuying season will be very robust.”
Last year saw intense competition for a razor-thin supply of homes, which ultimately drove home prices sky high and squeezed buyers out of the market. Despite Yun predicting strong activity in the spring, he suggested this year might not be as intense as 2021.
He cited rising mortgage rates as one crucial contributor.
“We don’t know precisely when, but when the mortgage rates rise, it will make a sudden jump, maybe a 50-basis-point jump—so mortgage rates going from 3% to 3.5% in one or two week’s time span and then staying at that level,” Yun said.
Yun then pivoted his report to address concerns over inventory constraints, stating that supply chain bottlenecks that strained builders last year will possibly start to dissipate in the spring.
Another source of inventory likely to take hold are homeowners that participated in pandemic-induced mortgage forbearance programs that are winding down, Yun said.
“That program is ending, which means that homeowners in that situation have two options: find a job and start making payments or list the property for sale,” Yun said, and went on to suggest that a portion of homeowners will opt for the latter, which will add to the pool of new homes for sale.
“Overall, Spring homebuying season should be very robust,” Yun said. “Maybe not matching up with last year’s intense multiple offers, but one of the best in the past 20 years.”
On the regulatory and legislative front, 2022 promises lots of activity that real estate professionals will want to pay attention to, according to Ken Trepeta, executive director of the Real Estate Services Providers Council.
Trepeta hosted the “Inside the Beltway: What’s Happening in Washington and What Matters to Real Estate” virtual session, where he dove into the activity to come out of the Biden Administration this year.
“2022 is going to be a very interesting year with a lot of wildcards, and it’s going to be a heated political year,” Trepeta said. “It seems like it’s full steam ahead for all of us in terms of the housing market so far, but there is a lot that can happen, and there is a lot to watch out for.”
Trepeta indicated that policymakers would be prioritizing social justice and equity for minority communities in the housing, finance, and mortgage industries.
“I think we’re going to see activity out of the Consumer Financial Protection Bureau and the Department of Housing and Urban Development,” Trepeta said, he added that there will be a greater focus on fair housing, fair lending geared toward dealing with disparities in homeownership.
As a result, he encouraged the virtual event attendees to take a more proactive approach in their outreach plans and policies to account for minority groups and communities.
Trepeta also said that the industry should keep an eye on increasing emphasis on the environmental front pertaining to housing construction.
“There is this idea that there’s something wrong with single-family housing—that it’s somehow environmentally wasteful—that has caught on with a lot of folks in the bureaucracy,” Trepeta said.
He also indicated that some are pushing for more rental housing than single-family construction as a result.
“Anything that discourages new construction of single-family homes, in particular, is going to have an impact on inventory and prices,” Trepeta said.
Another metric that has captured headlines in recent months has been inflation, which has remained elevated since 2021.
How the Federal Reserve decides to address inflation in the foreseeable future leaves many questions, according to Trepeta, who pointed to recent announcements that interest rate hikes are on the horizon in 2022.
“Will it be under control and how soon will that be?,” Trepeta asked. “I think that will definitely affect folks.”
Missed the event? Replays including every panel and expert interview are available here.
Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to email@example.com.