The past year was a crazy ride in the real estate industry. The pandemic spurred record setting home buying creating a seller’s market. The scarcity of real estate properties at a time when demand dramatically increased saw valuations go through the roof. Investors grabbed up any available properties, and the demand caused prices to skyrocket squeezing out the average buyers. Here are some trends to watch for.
1. The rise in home values is expected to slow. Appreciation rates in 2021 reached as high as 20%. While demand still outpaces supply most experts agree the appreciation rate will be closer to 7-8% in 2022. Investors looking for fast returns should not expect the same profits of the past year. This may leave the window open for average home buyers.
2. Rental prices will continue to rise. Rental properties are still in short supply, and consumers who have been priced out of buying a home are renting instead. Builders can’t meet the demand quickly enough. Additionally, the prices of materials have shot up increasing the cost of construction so rents will be higher to cover those costs.
3. Mortgage rates are likely to rise. Pandemic buying and short supplies have fueled rising prices in all consumer products. To stem the rising costs the Federal Reserve is expected to raise interest rates at least marginally in the coming months. Experts expect rates in the range of 3-4%. Even a small rise in rates will add thousands to a real estate purchase.