Last year, low mortgage rates and a limited supply of housing played a role in the strong rise in house prices and the persistence of the seller’s market. There has been a surge in new real estate markets as affordability, flexibility and lifestyle have become priorities in the home buying decision for consumers across the country. The burning question this year is, “Will there be a significant shift in the market?” While difficult to predict, there are several key 2022 real estate market indicators that I suggest keeping a close eye on.
Mortgage rates are a crucial factor in the strength of the real estate market. Even with slight increases over the past year, rates have remained at historic lows that are keeping homebuyers determined to buy despite a tight inventory market. Several economists have differing opinions as to the magnitude of the mortgage rate hike, but they all agree that we will see a gradual increase throughout 2022. As interest rates can affect demand and house prices and certainly putting more pressure on the lower end of the market, experts predict that we will see some downturn in the real estate market this year.
The overall health of the economy is, of course, a key factor in boosting the real estate market, but employment trends over the next year could spur movement in the domestic market as consumers, especially First-time home buyers are looking to more affordable markets and taking advantage of the ability to work remotely. In terms of unemployment, a steady downward trend since June of last year means more stability in the job market for Americans. The US Department of Labor reported that the national unemployment rate was 3.9% in December 2021, down 2.8% from the rate of 6.7% in December 2020. New trends in the employment and growing confidence in the labor market tend to influence further change. in the real estate market.
Another very important factor will be the construction of new homes, especially if inventory levels continue to be a challenge in markets across the country. I have already explained that Florida has experienced one of the fastest growing new construction industry and the volume of residential construction has continued to increase. Builders’ confidence in the market is strong and even with a potential increase in the inventory of existing homes, demand far outstrips supply in the housing market.
If we haven’t yet seen an unleashed force impacting the real estate market in the last two years, it is that of international buyers. It’s also hard to predict what impact this group of buyers and investors will have on the real estate market this year, especially with ongoing travel restrictions due to COVID variants, but major cities like Miami are already seeing the re-emergence of international buyers adding to market demand.
As Florida’s population continues to grow, there is plenty of room for growth in the state’s real estate market and these key indicators will play a role in what comes to fruition in the new year.
Duff Rubin is the president of Coldwell Banker Realty in Florida.