The housing market has been a roller coaster ride since COVID-19 began, and it hasn’t shown signs of stopping in 2022. It’s increasingly difficult for home appraisers to predict what will happen next, between seller booms and fluctuating mortgage rates. Here are some buyer relocation trends to watch out for in 2022’s hectic real estate market.
More Second Home Purchases
Many millennial and Gen-Z first-time buyers look for second homes before investing in a full-time primary residence. This trend has emerged for several reasons:
- More people in those age groups work remotely and don’t want to get tied down in one place.
- Affordability remains an issue for younger buyers who haven’t yet saved enough money.
- A second home can help build equity while searching for a primary residence.
Rather than moving to the big city and blowing their savings on an expensive apartment, the younger members of the workforce have wizened up. They’re buying part-time vacation homes and investment properties to strike the right balance between independence and affordability. They need all the help they can get.
Affordability Issues Will Persist
Mortgage rates dipped to record lows in 2021, then skyrocketed in early 2022. Previous predictions that rates would reach 3.6% have already been beaten, with 30-year fixed rates closing in on 5% nationwide. COVID-19, supply shortages and high inflation play a role in this rapid increase.
As long as those issues persist, we should not expect mortgage rates to level out any time soon. Affordability will remain a problem for first-time buyers and force them to seek areas with a low cost of living.
The Sun Belt Surge Continues
Buyers have targeted the Sun Belt region in recent months, and by all indications, this trend will persist throughout 2022. The area stretches the entire length of the Southern United States and has been a reliable refuge for people seeking a more agreeable climate, housing market and cost of living.
Austin, Nashville and other budding cities were the main attractions for a while, but now secondary markets are gaining relevance. Medium-sized metros in Texas, Florida and the Carolinas have performed particularly well, with single-family rental homes gaining a record 12.6% from Jan. 2021 to Jan. 2022.
Businesses have also begun relocating to the Sun Belt, bringing job opportunities and economic growth with them. Watch for the region to continue its surge in 2022 and beyond.
Millennials Still Prefer Renovating
Although the Sun Belt has seen impressive growth, the homeowning population as a whole would rather renovate than relocate. Options remain limited and there are only so many “dream homes” to go around, so many people have opted to add to their existing houses instead. Millennial homeowners led the way, with 75% of them renovating between 2020 and 2022.
Millennials were also more likely than other generations to make sweeping changes to their homes, spending an average of $40,600 on renovations compared to $10,000 and $11,000 for Gen X and baby boomers. These numbers are so disparate for two interesting reasons: weather and individuality. Extreme weather influences millennials’ renovation decisions more strongly than other generations, likely due to their heightened awareness of climate change.
Millennials have also shown a propensity to use unique designs with their renovations. They’re not afraid to use bright colors and unorthodox features to make their homes more individualistic. They are more willing to customize and don’t need a property to be perfect to purchase it.
Greater Demand for More Space
The demand for more open space has steadily increased since COVID-19 began. People want to trade their cramped urban environments for the suburban sprawl, and these listings have jumped by 42% since 2020.
People want more space inside for features such as mental health spaces, upgraded self-care rooms such as bathrooms and kitchens, and more expansive common areas. It’s no secret that the general population’s mental health took a hit during the pandemic, so we should expect these additions to gain popularity in the post-COVID world.
More Remote Work Accommodations
Millions of people switched to remote or hybrid work during the pandemic, and they naturally want homes to have remote-friendly accommodations. They want efficient office spaces, more natural light and more greenery. These features have proven to make employees more engaged and productive in their professions.
Remote work has also impacted homebuying habits. Buyers are willing to accept longer commutes and more secluded areas if it means they can find an affordable property with enough space to make necessary renovations. Workers no longer need to cluster together in urban areas, so they’re taking full advantage of other more remote-friendly properties.
Inventory Shortage Won’t Be Solved
Despite these promising trends, we likely won’t find a solution for supply shortages in 2022. There simply aren’t enough homes to meet the market’s demand, and it will take years of steady building to catch up. While activity levels are strong, supply chain issues for essential construction materials only allow builders to do so much.
A backlog of construction projects and a lack of supplies suggest that the inventory shortage will not disappear. Mortgage rates and home prices will continue to rise, putting properties out of the financial reach of even more buyers. It’s a vicious cycle with no apparent solution.
Real Estate Remains a Mixed Bag in 2022
We can expect positive and negative trends to control the housing market. The prioritization of remote work and mental health is promising, and at least the Sun Belt is showing signs of growth. Buyers are more informed than ever, making wiser investments and taking on more unique renovations.
However, unaffordability and supply issues will continue to plague the market and limit opportunities for buyers. It’s still a seller’s market, but it is no easy task to sell overpriced properties with high mortgage rates. Such paradoxes will dominate the real estate market in 2022 and beyond.