7 Real Estate Trends To Watch in 2022, Leftover from 2021

There have always been long-standing rules about real estate ownership, including the three most important ones: location, location, location.

But the one constant about real estate investing is that nothing ever stays the same. Even the location rule, because preferred locations change from year to year, and certainly from generation to generation.

The first two years of the life saw the real estate market bend strongly in the seller’s direction, as available properties were few and interested buyers were plentiful. There is some belief that, in 2022, more real estate will become available as Millennials make long-term decisions about their homes that they deferred during the pandemic.

As we approach 2022, it’s time to consider what the experts expect from the real estate market in the new year.

2021 Trends We’ll Be Up Against

First, a little background.

Since the arrival of the coronavirus, the real estate market influence has leaned heavily toward the seller and sometimes people investing in real estate, both novice and veterans. Available properties were seemingly non-existent while many people were looking to relocate due to loss of employment or other Covid-19 factors.

Prices for available housing were extremely high, and buyers were often forced to make non-contingent offers that were10 percent or more higher than they might have offered two years earlier.

At the same time, some investors snapped up available properties for flipping houses, taking advantage of the high demand and very low supply.

According to the Freddie Mac Home Price Index (FMHPI), the cost of single-family homes rose 17 percent from May 2020 to May 2021, the highest rate of increase in the history of the FMHPI, dating back to 1975.

Against this background, here are seven trends being watched. Remember that outside forces play havoc on real estate market forecasts, and a new surge in coronavirus threats could change these predictions, but this is what the market indicates as we head into the holiday season.

1. 2022 Will Be Better For Buyers (But Not By Much)

The climate for home purchases is expected to shift in the buyer’s favor in 2022, although the market will still lean to an advantage for sellers.

The FMHPI prediction for 2022 is 4.4 percent, a significant decrease. This change is due to a return to full employment for many Millennials who are now ready to buy a house post-pandemic for a better work-from-home environment.

What that means is that 2022 will be a better market for buyers than 2020 or 2021 were, but inventory is still likely to remain low.

Either way it tips in 2022, here’s some helpful advice about a handling a buyer’s market vs. seller’s market.

2. It’s Easier to Shop for Mortgages Online

Back in the day, purchasing a house included several meetings, and at least one of them was uncomfortable: The meeting with a mortgage lender.

This meeting is typically the time when all your personal finances are exposed and your ability to pay back the mortgage funds you receive is predicted. It’s one of the most expensive decisions in your life, and you don’t really breath much through the process as you wait to see if you are approved and what the loan is going to cost you (and for how long).

Today this step looks different. It no longer needs to be an in-person discussion, and you can now hunt for the best mortgage rate online.

There are dozens of lenders, many of them very reputable, who will make you a mortgage loan offer online. You fill out forms just like you would in the past, but there is no one breathing down your neck as you do it.

The end result is the same, but the process is more impersonal, which in this case might be better.

The Federal Trade Commission offers guidelines for finding proper mortgage offers online and what to watch out for in terms of disreputable agents.

The online process also makes it easier to acquire multiple mortgage bids rather than needing to meet with three or more people in an office setting.

3. We’ll Invest in Unreal Real Estate

Back in the day, there was one reality related to the supply-and-demand engine of the real estate market: supply was never going to change.

While the amount of available real estate that is for sale could change, there is a finite amount of land to build on and dwell on, hence, a finite amount of real estate.

That is no longer true.

It is now possible to invest in virtual real estate, a cousin to investing in bitcoin and cryptocurrency. Virtual real estate investing is operated by the same blockchain technology that powers and supports cryptocurrency, but instead of non-existent coins, you get to own non-existent property.

And sell it! At a profit!!

That’s because more people are buying into this new form of society-building in virtual communities with names like Decentraland, Genesis City and The Sandbox.

These “metaverses’’ are digitals cities with homes, neighborhoods, shopping, and places where you and your new neighbors can gather (virtually, of course) to have the full social experience.

Each community has developed its own currency, which you must purchase in order to have a way to pay for your property.

It’s a way to invest in real estate without worrying about all of the things that investing in real estate deals with.

Virtual real estate is considered a non-fungible token (NFT), a form of cryptocurrency asset that offers ownership proof through blockchain technology, the same as any cryptocurrency. According to the company that created The Sandbox, $8.6 million was spent between April and June 2021 on properties there.

Is “there’’ even the correct word?

If your head isn’t spinning, check out our article about how to make money buying virtual real estate.

4. We’ll Invest in Real Estate Investment Trusts

Our spending habits have changed over the past two years. We are traveling less and saving more, and there are large populations of MIllennials and Gen Xers who have money to invest.

Real estate is always a safe investment if done properly, but this does not necessarily mean buying a home. It most likely means investing in a Real Estate Investment Trust (REIT), which is a mutual fund of real estate properties that is a very popular way to get into the real estate market.

Because of the pandemic, REITs are unusually attractive because there is so much commercial real estate on the market selling at low prices. Office buildings that used to be bustling centers of commerce now stand nearly abandoned as companies embrace virtual offices and remote work conditions.

Guess who else has an abundance of available commercial properties to sell? The federal government, that’s who. There is an entire division of the government that sells surplus federal property through online auctions.

5. We’ll Invest in AirBnB-Type Properties

Owning an apartment building is a complex investment, requiring endless repair and upkeep, constant attention to rent payments and payments in arrears, finding renters for your empty apartments, and handling to complaints from your tenants.

An easier way to make money by owning real estate is to rent our your home (or your second home) to travelers via AirBnB or similar services.

According to propertymanagement.com, there are 23,000 vacation rental companies in the United States, and in 2020 they accommodated more than 600,000 travelers.

If you live in an area that is popular with travelers, owning a second home for the purposes of renting it out is a good way to get into the real estate business. Rental homes are less expensive than hotel rooms, often more comfortable, and can offer a home away from home for weary travelers.

And, between visits, cleanup is much easier — no need to repair after a long-term renter who put holes in the wall to hang TV monitors, for instance.

6. Workplace Uncertainties = Home-Buying Uncertainties

The pandemic threw the real estate market for a loop for two reasons: people lost their jobs and needed to downsize, or people were told to work from home and needed to change their home dynamic.

The great Return to the Office that was predicted back in May 2021 has not happened.

Many companies keep putting off any sort of return to office habitation, including hybrids. Many workers keep getting notices that a return will happen in three months only to see the date pushed back.

Meanwhile, there has been a migration of workers from one major urban area to another, or to the suburbs, or to warmer climes. Some people may be changing homes in the same town or area.

But many are dangling as they await a “go back to the office” order some time in the future.

So, renters are still trying to decide whether they need to buy. And homeowners shopping for a house post-pandemic are asking themselves whether they need a place with two office spaces rather than one office and one kitchen table.

7. Natural Disasters Are Impacting Home Costs

Whether wildfire concerns in the west, hurricane damage in the south or flooding in many other parts of the country, insurance companies are responding to the increasing occurrence of natural disasters by increasing premiums for homeowner’s insurance or flood insurance.

In some places, it is getting impossible to get affordable flood insurance anymore, and the process of making claims for flood or wildfire insurance is long, painful and not always successful.

And as weather disasters have increased in number, the price of homes in disaster-prone areas has decreased significantly.

While home prices have skyrocketed on average throughout the country, the places where hurricanes and wildfires are dominant have seen average home prices drop in response to concerns over the long-term safety of the home.

In some areas, homeowner’s insurance might not cover water damage or might be unavailable to protect against other dangers.

This post on TessMore Finance was also published on The Penny Hoarder.

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