Outlook for 2022

I was watching an interview with Barbara Corcoran this week. She was asked if she thinks the real estate market has peaked. Her answer was no. Unless interest rates increase by 3-4% overnight (which won’t happen), the inventory shortage won’t subside for a while. What does this mean for you in 2022?

There have been so many mixed messages about the outlook for 2022. Some economists think we are in a bubble that could burst (they just aren’t sure when). Other economists think we are going to ride this wave for a while. My 40 years of experience tells me that whenever we see excessive price increases for a sustained period of time, we are prime for a correction, but what has happened in the past doesn’t always predict the future.

Nearly every market on both sides of the border are experiencing housing shortages and record-high prices. I’m sure some of your clients are skeptical about whether they should make a move given these market conditions.

I read an article this week that talked about the 10 signs of a healthy real estate market. In my opinion, we are currently experiencing 8 of the 10 signs, so I think it is safe to say that 2022 will be another good year. Let me review the 10 signs with you, so you can use this information to advise to your clients on why it is still a great time to make a move.

1

Young people are buying starter homes instead of renting.

 

Starter homes are in demand, signaling that many first-time homebuyers feel confident buying rather than renting. When the economy is healthy, starter homes sell quickly, which allows homeowners of small, affordable houses and condos to move up.

2

Foreclosures and short sales are hard to find.

 

When the housing market is healthy, there are few distressed homes for sale. There are plenty of buyers in the market right now, so even if homeowners are financially challenged, they can easily find a buyer and offload their home quickly before they default on their mortgage.

3

Mortgage rates are lower than normal.

 

Mortgage rates are another indicator of a healthy market. Many buyers have capitalized on our record-low interest rates to buy houses they otherwise couldn’t afford. Interest rates are predicted to rise in 2022 which should bring balance to the market, but they won’t increase enough to cause a major slowdown.

4

Real estate companies are thriving and hiring.

 

Many real estate companies have had their best year on record, and they are growing. I spoke with one President in Atlanta this week and they’ve hired over 400 new agents this year. Many people lost their jobs during the pandemic, and they turned to real estate as a new career.

5

The unemployment rate is low.

 

High rates of unemployment have a direct effect on the housing market. When unemployment rates are low, there is more money circulating in the market. Buyers with stable jobs are able to save more money for a down payment and they feel more confident making major life decisions. When people have steady employment, they tend to buy rather than rent.

6

For sale signs are hard to spot.

 

The lack of for sale signs is a good indicator that the market is healthy. When the market is healthy, houses sell quickly, which means for sale signs don’t stay in yards for very long. When you start seeing more for sale signs in your neighborhood, it is a sign the market is cooling off and houses will take longer to sell.

7

The list-to-sell ratio is above 100%.

 

When houses sell over asking, it is a signal of a healthy market. The higher the ratio, the healthier the market (although I would argue that the ratio has been too high lately and unsustainable).  When the list-to-sell ratio starts to drop below 100% it is an indicator that demand is decreasing.

8

Sellers are also making home purchases.

 

It is a sign of a healthy market when home sellers are moving up. In a bad market, home sellers often find themselves in financial trouble and decide to rent rather than buying again (at least temporarily). When the housing market is healthy, sellers feel comfortable buying larger, more expensive homes. The luxury market has been doing incredibly well this year, signaling there are many buyers moving up.

9

Asking prices increase at a steady pace.

 

Increasing house prices is a sign of a healthy market, but this is one of the signs that causes me concern. Prices have increased too rapidly to be sustainable. In a healthy market, prices increase at a slow but steady pace. When house prices increase too quickly, affordability is a major issue and banks will start to raise interest rates to cool things off.

10

Stats show housing affordability.

 

The market is healthy when lots of people can afford to buy a home. One way to track if buyers can afford to purchase a home is to look at NAR’s Housing Affordability Index which tracks median income of families to determine what percentage can afford to buy a home. The higher the percentage, the more buyers who qualify to buy, indicating a healthy market. Affordability is another area that concerns me. Inflation has been on the rise which means buyers have less discretionary money to put toward housing. Everyone could take exception to the statistics, but in theory, I think we would all agree that we have a healthy real estate market.

Given that we are currently experiencing 8 of the 10 signs of a healthy real estate market, I predict we are going to have a great 2022, barring the Feds doing anything crazy with interest rates or stimulus funds.

As the old adage says: “Make hay while the sun shines.”

I think it is incredibly important that you focus on listings next year. The agents who struggle will be those who work on the buyer side. The agents on the seller side will have some of their best years ever in real estate.

If you want more information how to make 2022 your best year ever, please visit https://leadersedgetraining.com/agent-virtual-training/.

Chris Leader
President
Leader’s Edge Training

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