Here are some of my observations about and predictions for the 2022 real estate market:
The ‘inventory’ – existing homes that are listed for sale – is expected to be smaller in 2022 than it was last year. While some homeowners are taking advantage of the increase in value of their homes, many are staying put for want of the ‘next home.’ Empty nesters don’t have many options to downsize, as few condos are being built in central Licking County. Different surveys are finding that homeowners are just generally happy with their homes and don’t feel compelled to move. Inventory is best described as ‘fast’ – where homes are coming on the market and many are in contract in days.
As with many things in life today, the speed of the internet now has buyers finding out about homes as soon as they are listed, and generally trying to tour it within a day or two. Showings are set up right away, and interested buyers are competing. With heightened interest as soon as a home comes on the market, the seller can usually expect offers at or above list price. The dynamic here is that the seller has no reason to take less than list price if there are buyers who want to buy the home, and so that usually establishes the ‘floor’ for prices, unless the home is grossly overpriced. Historically, homes were on the market for 100-120 days; last year homes in central Licking County were on the market an average of 15 days, and a median of 5 days!
The market will remain very much imbalanced with supply far exceeding demand: a seller’s market, as it’s been for the past two years. Multiple offer situations will continue to be common. Now is a good time to sell, and I often recommend that sellers go away for the first weekend that their home is on the market since they’ll have to be out of the house for a great number of showings that first weekend.
Home values have been rising 8-10% per year for the last three years. While this appreciating market is expected to slow somewhat, it is expected to continue for another 3-4 years. Locally, the relative affordability of homes here is drawing higher-paid workers who are no longer tied to a physical office.
Rates for conventional 30-year fixed mortgages have risen from the low of about 2.8% now to about 4.7%. A rise of 1% means a buyer can afford about 10% less in purchase price for the same mortgage payment. In this market, most buyers are buying well within their budget; indeed, buyers are usually shocked by the size of loan a lender is willing to give them. With a significant rise in interest rates, buyer may pause, recalibrate, and then keep looking. This higher payment often means eating at home instead of eating out a few times per month. Mortgage rates are expected to gradually rise, possibly to 5%. These rates are driven by the market for 10-year Treasury Bonds. Mortgage rates have moved in lockstep with the 10-year Treasury rate for many years. Interest rate changes by the Fed have only an indirect impact on mortgage interest rates; the rates are largely determined by the capital market.
Demand will continue to be very strong here in Central Ohio which has a robust and growing economy, affordable housing, and easy access to a significant portion of the United States. Many Ohio natives who relocated for job opportunities are coming back when employers embrace permanent remote work for some of their employees.
Nationally, home production numbers have only recently recovered from the 2008 recession, and it will take a number of years for the home builders to make up for the deficit in new construction from 2008 to 2019. Builders generally are not building single-family homes for less than about $300,000; materials costs have risen greatly in the last few years, and there is also a ready market for homes at that price point. What that means is that home buyers who can afford homes in the $200,000’s or lower will be competing for existing homes.
Intel, Intel, Intel
I don’t think all of the real estate in Licking County is worth $20 Billion – the investment coming to the area southwest of Johnstown! There are other forces I’ve mentioned above that are most strongly affecting the real estate market. As workers arrive, and especially higher-paying technical and managerial positions are filled, the demand for quality homes will increase.