According to market analysts, there’s a historic shortage of real estate for sale all across the nation in 2022. Will homebuyers encounter much trouble on their quest to find a shelter for themselves?
To dodge the ‘housing’ bullet, the best course of action is to get in touch with local real estate agents to double-check your housing options in your favorite neighborhood!
The start of 2022 doesn’t do any favors for new homebuyers.
Suppose you wish to diversify your investment portfolio by purchasing a new home in 2022. Then, you’d better prepare yourself for a wild ride because real estate prices are pretty high in the first term of the current year and new houses are dramatically low.
Honestly, this shouldn’t come as a shocker for anyone. Housing market trends in 2021 already experienced a sudden drop in inventory of new homes by April 2021. One would expect that the official government agencies drew a line, ended this dysfunctional housing market, and pressed forward brand-new building projects. However, this has remained all but a fantasy. In short, the housing demand still outnumbers the property supply for sale. Seemingly, the seller’s market casts an ominous shadow upon us.
Fortune reported that new US property listings decreased by three percent as of mid-February 2022. Even more distressing is that the available number of active listings dropped by twenty-six percent compared to 2021 statistics! Are we facing a new record and, ultimately, a crisis of inventory shortage? Real estate market predictions for 2022 were mildly optimistic, heralding the stabilization of home prices, which went haywire in 2021.
Hoarding has partially triggered the shortage of home inventory.
Did you know that hoarding is an actual and feared concept in today’s US real estate world? And it doesn’t only apply to stockpiling (mostly) needless junk into your home but properties too? In a tough seller’s market characterized by low inventory, investors can purchase several real estates and hang onto them. By doing so, they expect property and rent prices to climb even higher. In other words, they’re the ones who will bid higher than you. Subsequently, they are artificially boosting prices in the short run.
Pure real estate speculation? You decide. Undoubtedly, however, stockpiling houses will do good neither to the economy nor the housing market. How long can they go on with this strategy? Is the US real estate market prone to crash due to them? The answer is more complex.
Telling data on the available homes
Although the housing market flourished during the Covid pandemic in various US cities, soon investors found themselves in a tough predicament. For starters, the housing inventory hadn’t been doing exceptionally well even before the pandemic kicked in March 2020. Shortly, the number of homes featured as actively listed real estate for sale dropped from around 1.31 million (mid-2019) to approximately one million by February 2020. The US housing inventory has been plunging ever since, reaching an all-time low by December 2021 with only around half a million properties listed.
These figures prove a jaw-dropping sixty-five percent decline in available real estate to buy compared to May 2019. No wonder property prices go high and higher by approximately 19 percent year after year. Consequently, they are touching their peak value, surmounting the 2006 property prices. One might logically believe that the trend established by the 2021 real estate bubble will continue.
Inventory of new home listings
Here, too, we can notice a supply shortage. In 2019, there were around 5.2 million new homes listed. Still, the supply decreased to approximately 4.3 million new properties by the end of 2021. Consequently, we arrived at an around 1.5 million listing shortage by the beginning of 2022.
Inventory of homes in February 2022
Homebuyers beware! The most recent statistics of new listings for properties show that another drop in active homes took place by approximately twenty-six percent as compared to a year before, more precisely mid-February 2021. Record low real estate inventory indicates that you’ll be treading on a minefield if you’ve made up your mind to buy now.
Is there an escape from the domino effect of the US housing shortage?
First of all, potential home sellers should assume courage and list their property for sale as they did in the pre-pandemic period. Thus, the average inventory of homes would naturally grow on the market. We’re talking about a genuine shift in people’s mentality. How should we initiate the sequence? Hopefully, we’re beginning a new era with the pandemic coming to its slow death. People can finally have a breath of fresh air. Let’s start mending the abysmal state of the US home inventory by eliminating our fears of an unpredictable financial future and loss in revenue that would eventually break the chain. That means no more hoarding!
Secondly, interest rates will also have a saying in returning to normalcy. The hoarding approach benefitted from the record-low interest rates in the last couple io years. Economic forecasters and analysts outlined the necessity of growing interest rates more considerably than the Federal Reserve indicated. According to recent predictions, the Fed will increase interest rates by 1.75 percentage points. Therefore, higher mortgage and interest rates will directly contribute to homeowners’ willingness to sell their homes because they’d have to pay more to the bank. Additionally, housing prices will go down due to raised interest rates.
Presently, we require approximately 5.5 million homes. The good news is that new housing residential constructions are on the way. The US Department of Housing and Urban Development reported impressive statistics at the end of January 2021 with 1,881,000 building permits given, 1,580,000 housing starts, and 1,336,000 housing completions.
Right off the bat, you shouldn’t mistake a low housing inventory with a solid real estate market! The only beneficial aspect of today’s housing market is the demand. The unsound part is that many owners choose to withdraw their assets from listings, hoping to get a heftier income in the future.
On the other hand, homeowners will think twice before selling their real estate, knowing that they might not be able to buy an affordable one
shortly and easily. We’re speaking of a vicious psychology cycle with the wheels going round and round. We must do away with this harmful inventory phase and skeptical selling attitude so the US housing market can get back up on its feet! Therefore, housing prices will have the chance to come back down.
The harsh truth is that you most likely won’t find a cost-effective property right now. The present housing market is so challenging that chances are a cash buyer will outbid you even if you found an ideal home. A record low inventory level and high housing prices played a significant part in this outcome.
Nevertheless, we can assuredly predict that the US housing market will most definitely not crash in 2022. We might add that things will get back to normal with a certain degree of precaution. Higher interest and loan rates will motivate homeowners to stop piling up property and stimulate selling. At the same time, the psychology of fear shall end, resulting in real estate prices going down. Consequently, the shortage of cost-effective housing will not cease suddenly in 2022, but it will stabilize by the end of the year.