You may wonder what to expect from the housing market now that the Fed has hinted at future rate hikes, and this is a valid concern.
The market for new house starts won’t get as out of control as it was in 2021. It will still plod ahead at a respectable rate. Still, you’ll have to remain on your toes as housing supplies remain tight and prices rise.
Market Changes in 2022
In late 2021, the Federal Reserve announced interest rate hikes for the coming year. The hikes will affect home values and sales. For instance, buyer contingencies will once again become a part of the negotiation process.
Real estate watchdogs don’t expect the market to reach the fever pitch of 2021. In 2022, the marketplace will move at a less frenzied rate.
New home builders will see slower sales activity as the year progresses. The days of intense multiple offers have passed. Now, buyers will have the luxury of taking their time.
Still, industry experts don’t expect house prices to fall. At the same time, price appreciation will most likely move sluggishly.
Things Still Favor Builders
The housing supply shortage still persists. Resultantly, the sellers’ market is still going strong.
In 2022, however, it’s crucial to mind your pricing. The days of double-digit price appreciation have also passed.
Prices won’t increase by the meteoric rate of 18% as in 2021. Instead, sellers might look forward to an increase of about 7.5%.
Some real estate experts believe the market might experience a smaller increase. However, they all agree that a reversal isn’t on the horizon. Instead, the market is heading into a cooling-off period.
In this latest iteration of the housing market, people will mull over sales based on logical buying factors. Resultantly, this isn’t the year to speculate on big price gains.
Still, new homebuilders are uniquely positioned to capitalize on these trends. They can customize homes to suit the desire of every buyer.
This scenario gives builders an opportunity to showcase their ability to partner with homebuyers. More importantly, it enables builders to deliver the right house at the right time—and at the right price.
Because you operate in the new home space, you can give buyers control over the details of their homes. They can choose the options that fit their tastes and lifestyle. With a new construction home, buyers get to pick many of the features that will go into the build.
The Agility to Profit in an Emerging Market
In 2022, as usual, location will continue to serve as a critical factor for both buyers and builders. For example, children’s needs are often a top concern with homebuyers.
When homeowners choose where to buy, they often research the quality of school districts. As a builder, it’s essential to continue to target these growing communities.
Parents want their kids to go to good schools. These schools usually have higher achievement rates in English and math—more on emerging markets in a moment.
Catering to Clients
For buyers, new construction means they can choose a floor plan that meets their current needs. One selling point is that a custom-tailored new construction home can save buyers from a stressful and expensive future remodel.
With new construction, you can give clients the open floor plan sans formal living space preferred by many modern homebuyers. Also, new home buyers want homes built close to 1,000 square feet larger than the average home. In addition, most of today’s homeowners want a home with an owners’ ensuite bath.
Another growing concern among today’s homeowners is multigenerational living. As a result, flex rooms are also a frequently requested customization for new homes.
Things Look Solid Through 2022
Throughout 2022, real estate experts expect demand for homes to remain strong across the nation. Higher wages will drive buyer demand, as will improved employment and a stock market that’s increasing in value.
Lack of inventory will continue to serve as an obstacle for new homebuyers. As a new home builder, however, you can help bring the market back to equilibrium with new housing starts. Now, they’re dangerously low.
There’s one thing that remains a wildcard in the housing market, however. Analysts aren’t sure about the effects of a newly minted work-from-home labor force. If the trend continues, people will most likely look for homes where they want to live rather than near their employer.
What the Future May Hold
In 2022, builders will most likely have the opportunity to return to the relatively slower pace of more carefully considered home buying. Service, partnership, and expertise foster stronger relationships with our communities in this environment.
Also, inflation will ease as interest rates rise. New homebuilders can also expect slower housing appreciation.
Some market experts predict that the annual median home price will increase by 5.7%. They also forecast that inflation will rise 4% with two Fed rate increases of 0.25%.
Eye on the Big Picture
The sentiment among economists and real estate experts is that the housing market and economy will normalize throughout the year. Although inflation will increase by 4%, this rate represents a deceleration after hefty increases in 2021. In part, the Fed’s planned increases will fuel this change.
More importantly, there are a few communities that might offer stronger appreciation relative to the market this year. You may want to keep your eye on a few select communities, including:
- Dallas-Fort Worth, Texas
- Daphne-Fairhope-Farley, Alabama
- Fayetteville-Springville-Rogers, Arkansas-Missouri
- Huntsville, Alabama
- Knoxville, Tennessee
- Palm Bay-Melbourne-Titusville, Florida
- Pensacola-Ferry Pass-Brent, Florida
Overall, the housing market performed phenomenally in 2021. Still, some markets did well, but not as well as fundamentals suggested they should have. In 2022, these communities have room for growth.
Make Moves in a Changing Real Estate Market
In 2022, Marketplace Homes has several programs that can help you profit with new construction homes. We’re uniquely positioned to connect buyers and sellers in a way that’s not possible when working with other real estate services.
If you’re ready to get off to a great start in 2022, please feel free to review our new construction programs.
Andy is an experienced real estate professional who has spent over 7 years at Marketplace Homes leading teams. As a savvy sales expert, he hosts our brand new construction web series Breaking Ground. For the past two years, he has taken the helm as the company’s CRO, ensuring the alignment between Marketing, Sales, and Customer Success. Providing creative insights and solutions, he uses data and continues to develop teams to make the complex simple. His passion is to help every client find the best solution to move, invest, and much more.