“Comparing anything to 2020 or 2021, it doesn’t make any sense.”
That is the conundrum—summed up frankly by Anne Marie DeCatsye, CEO of the Canopy REALTOR® Association in Charlotte, North Carolina—for anyone trying to parse out the current real estate market. As economists and practitioners all across the country have sought for months to draw comparisons, find context or create some kind of reasonable expectation for 2022, one of the biggest challenges has been accepting just how unbelievable the last two years have been.
On a panel held Tuesday reflecting on the last six months (and trying to predict the six remaining months of 2022), DeCatsye was joined by four other major REALTOR® association presidents, delving into the various ways an inventory-starved, price-spiraling housing market has evolved across the country.
“The real estate industry is making headlines,” said Ryan McLaughlin, CEO of the Northern Virginia Association of REALTORS® who hosted and moderated the panel. “And why shouldn’t the real estate industry be making headlines?”
With 17% of the entire country’s GDP attached to real estate, McLaughlin’s thesis is hard to argue. Understanding where markets are headed, and what presumptions may no longer be accurate is vital not just for real estate but for the country.
According to the panelists, who represented large metros in the South, Atlantic Coast and West, real estate in 2022 is its own animal—not nearly as unhinged as it was during the height of the pandemic, but not quite a return to the good old days, either.
“We’re starting to see 2022 look more like 2019,” DeCatsye said. “I would say a slower pace in sales, and that is actually going to start to allow us maybe to increase inventory—we actually saw in May the first increase in year-over-year new listings.”
Nobu Hata, CEO of the Denver Metro Association of REALTORS®, said his region is coming up against the after-effects of “the great migration, the great resignation,” harangued by institutional buyers, cramped by land use restrictions and battling brand new affordability concerns.
“People came from all over the country to move here, ten years ago for its relative affordability,” he said. “The thing that you’re seeing a lot here, once you get out of the Denver-county area, you get out into the suburbs of the Denver metro, you see the institutional buyers share is 14% higher than it is in most of the rest of the country.”
Rising rents have also made Denver a more difficult housing market, and deep-pocketed landlords and housing speculators are not helping, he claimed.
“A lot of these enterprise sized buyers are coming in, buying up the homogeneous housing and renting the inventory back out rather than putting it back on the market,” Hata claimed.
Although many of these challenges are not new, the panelists agreed for the most part that it was time to stop looking at 2022 as an extension of the last couple years, and start decoding what real estate is going to look like in a post-pandemic world.
Coasting or crashing?
Most obvious and pertinent to real estate practitioners is the question of whether the market is slowing down. While some broad national data is pointing to some kind of downshift in pace and prices, panelists were mixed on whether that had affected the day to day opportunities in their markets.
“Like many other cities in the nation, it’s all the same—lack of inventory, rising costs and supply chain issues,” said Gilbert Gonzalez, CEO of the San Antonio Board of REALTORS®. “With all that demand, our days on the market was 30 days, and our inventory is 1.4 months. So it’s still a little bit better than other communities.”
“We don’t see it slowing down here. We don’t see the days on the market slowing down anytime soon,” said Wendy DiVecchi, CEO of Las Vegas REALTORS®. “We have houses that hit the market and people are hitting six and seven offers at anywhere from $30,000 to $50,000 over what it’s listed for. We don’t see that slowing down. Members are saying that instead of the house hitting 15 offers in 24 hours, maybe it is now 48 hours or 72 hours.”
Some markets are simply better braced for the major economic shifts that affect everyone—rising mortgage rates, inflation and slowing consumer confidence. McLaughlin described the “churn” in the D.C. labor market from government and government contractors as a sort of buttress against these headwinds. For DiVecchio in Las Vegas, huge long-term investments by casinos and professional sports franchises continue to buoy the whole market, with brand new basketball, football and hockey teams, and recruitment efforts to draw even more teams.
“We are becoming a sports capital,” she says.
Gonzalez claimed that relative affordability has kept San Antonio a destination for Florida, California and New York transplants even as other destination cities spiral out of reach. A study by Texas REALTORS® shows that San Antonio is the third-most popular destination in the state for people driving UHauls, according to Gonzalez, connecting that with new families moving into town
“There’s this huge influx of families coming to us,” he said. “We feel the most popular reason is you can still find a home and have the opportunities to buy a home at many different price points. It’s not easy by any —the market is just as demanding here—but it’s still much more affordable than other parts of the country, which we think is the number one driver for people to come to San Antonio.”
One problem that did seem to connect every panelist’s market was this affordability question. Gonzalez admitted that even in his city, people were moving further away from the city center to find entry-level homes. Hata said that besides the problems created by institutional buyers, something as simple as the cost of hooking up water for a new house can prevent new affordable housing.
“It costs up to $90k to tap the aquifer for one house,” he said. “When affordability comes into play, you’re dealing with these kinds of enterprise sized issues for a government that is essentially waiting to be paid from all this growth in the last couple years.”
McLaughlin said Arlington, one of the major markets in his area, is considering eliminating single-family zoning—something the entire state of California tried to do at the beginning of this year. He and brokers in the area are “at the table,” advocating for what they believe is best for the industry.
“To us, as an industry, that’s probably one of the most important things that local government can do is actually partner with, work with their local REALTOR® association and real estate industry leaders communities, because we can bring perspective, tools and resources and data.”
Catsye, who added that she is also working with local governments on things like ADUs and zoning reform, again summed up the issue at the highest level, saying that prices will have to moderate and large-scale changes to housing must be implemented to get more buyers into the market—particularly entry-level buyers.
“There’s no one size fits all solution to the affordability issue,” she said. “For 80% and even 60% below area median income, it’s going to take the public-private sector together to solve the issue. It’s not going to be on the backs of the private sector, it’s just too expensive.”