An ongoing and historic rise in inflation has shaken not just the real estate industry, but has affected nearly every business and consumer across the country. With December’s Consumer Price Index (CPI) topping 7% year-over-year—the largest increase since 1982—real estate professionals are asking just how profound the impacts will be on their clients and markets.
At RISMedia’s Real Estate Rocking in the New Year virtual event earlier this month, some of the industry’s most respected and influential minds came together to break down the potential for disruption, likely future trends, and actionable steps to take for real estate brokers in the face of these alarming numbers.
“I think in 2022 we’re still going to see a really robust market once again. I’m very optimistic about it,” said Joan Docktor, president of Berkshire Hathaway HomeServices Fox & Roach.
Even with mortgage rates already ticking up and likely to increase further this year, Docktor and the other expert panelists broadly agreed that demand for homes would not be significantly hampered and home prices would continue to appreciate.
On the other hand, Scott MacDonald, broker/owner of RE/MAX Gateway said that inflation has pushed the cost of new home construction to dizzying heights, with building materials still seeing costs climb 500% and that could push some out of the market.
“You’re going to see all these costs passed over to consumers as a result of that,” he warned. “People are going to get more concerned about how they’re spending money, and it’s going to be a challenging time for consumers and for purchasers of new homes.”
But for anyone who can afford a home should not be discouraged, he added, as home price appreciation has always been a good hedge against long-term inflation.
Sarah Richardson, CEO & founder of TruRealty, pointed out that rising rents are going to push more people to buy despite continued low inventory and inflationary pressures.
“Consumer confidence is very strong, I think it’s going to remain very strong, but we could probably use a little bit more inventory to help some of those buyers fulfill their dreams in becoming a homeowner,” she said.
That lack of inventory is affecting everyone, the panelists said, and there is no quick solution to that. But Docktor posited that prices might “taper off” once inventory opens up as more normalcy returns to life and people have babies, get married and change jobs, resulting in more existing home sales.
Panel moderator Dan Kruse, CEO/president of Century 21 Affiliated said he has heard concerns that the number of home sales overall would drop in 2022 in response to inflation and continued low inventory—a question that has seen disagreement from experts so far.
As the “sticker shock” of inflation wears off, though, Richardson said she looks at the macroeconomic fundamentals continuing to indicate continued strength in the real estate market.
“I still think people are making more money, there are jobs out there. The economy is really, really strong, so 2022 is still going to remain strong. I think we’re still going to remain a seller’s market,” she predicted.
As far as what real estate business owners need to do in the face of these still-unprecedented times, MacDonald said that educating agents will be the most important step to take as both consumers and real estate professionals encounter confusing and often conflicting information about inflation and markets. That includes the kind of national expert commentary and predictions provided by the panel, as well as hyperlocal market info about open house traffic, offers and home sales.
“Being ahead of the game and being up to date with the trends is something we need to have our agents know, so they can take that information that we provide them, to share with the clients,” MacDonald said. “Getting that information and relaying it out to your agents is critical.”
For business owners trying to save money this year, Docktor said that having agents in the office less—something that was already a trend in real estate before the pandemic—gives business owners an opportunity to find efficiencies with hybrid work models, balancing culture with flexibility. Consolidating smaller offices is even an option, she added, which can also create new synergies for back-office operations and infrastructure.
“You really need to study the market, study what your agents want, make sure you are able to give that to them,” she said. “Make sure that you have the space that they need, but you don’t have that overflow of space that you don’t need because space and employees are your most expensive costs.”
An overall positive outlook on 2022’s possibilities in the face of inflation, however, should have real estate business owners pushing forward rather than pulling back, according to Kruse, as short term worries and uncertainty are very likely to morph into another big year for real estate.
“We’re all looking at the industry and saying there’s a positive time ahead of us and what 2022 has in store,” Kruse said.
Missed the event? Replays including every panel and expert interview are available here.
Jesse Williams is RISMedia’s associate online editor. Email him your real estate news ideas to email@example.com.