The good news in early 2022 was an apparent slowdown in the runaway home sales prices that had characterized the previous year. Homes that consistently sold for over the asking price seemed to be on the market longer, and there were fewer bidding wars. On the other hand, rising interest rates proved that it can still be difficult for potential buyers to trade rent payments for mortgages. Although the higher prices and rising rates have moderated demand somewhat over the past six months, it now seems clear that the desire to buy continues to be strong. In addition, prices for rental homes and apartments continue to rise, and will perhaps reach record highs before the end of the year.
What does this mean for the housing market in general? For some experts, it is a worrisome trend. For others, though, the fact that there are now more homes available for sale is a positive sign, and sales statistics are evidence that buying is still a good move.
The July 2022 Apartment List National Rent Report shows that rents climbed by 5.4% during the first six months of the year. During the same period in 2021, the increase was 8.8%. Perhaps not surprisingly, New York City holds the record for the highest rental rate increase. Sun Belt cities may find prices leveling for the remainder of the year. But rental prices are still rising faster than during the pre-pandemic years.
In other statistics, the report showed that 97 of the country’s 100 largest cities have seen rent increases during this six-month period, but that the increases were less than during 2021 in 73 cities. Analysis of rental market statistics by Realtor.com confirms that month-to-month increases continue to be posted in markets throughout the nation, and that the median rent in the top 50 American cities reached record numbers for “the 15th month in a row.”
The typical rent for a one or two-bedroom rental house was $1,849 in May, and is expected to reach $2,000 in some markets as early as October. Studio apartment rent is also climbing at record rates.
A promising sign in most markets is that housing inventory currently exceeds the number of buyers. It is hoped that the recent frenzied bidding wars may become past history. But with rates inching up to between 6.5 and 7%, the cost of buying is definitely increasing. Potential buyers must also consider the additional costs of home ownership, and plan wisely for long-term home ownership.
Analysts caution potential buyers to be more realistic about their needs, and to stay below the upper limits of their affordability range. Some recommend renting for an additional six to eight months to build a more substantial down payment, while others suggest locking in a rate with a lender as early as possible in their home search.
Escalating inflation also impacts the real estate scene. Investors and sellers may view higher prices as beneficial, while builders, buyers and renters are certain to pay more. Existing real estate will no doubt be worth more than it is currently, and the return on real estate investments also seems destined to increase. Most financial advisors still view such investments as a worthwhile hedge against inflation, whether you buy a home, or invest in real estate in another way.
Your personal financial situation and point of view will determine how you look at housing for the rest of this year, and for the future. But there is widespread agreement, now as in the past, that real estate is a wise investment.
https://www.noradarealestate.com/blog/rental-prices/
https://smartasset.com/mortgage/how-rising-interest-rates-impact-buying-vs-renting
Contractors, real estate agents, and homeowners have been hyper focused regarding what the selling market will look like within the last few months of 2022 and into 2023. Will mortgage rates be favorable for people looking to purchase a home? How much housing inventory is available to meet rising demand? What will average home prices be as we start to ease away from pandemic fears?
Before going over the future predictions, let’s take a look at where the housing market is at today. According to the National Association of Realtors (NAR) the month of July 2022 saw sales of 4.81 million units (at a seasonally adjusted rate). Median home prices averaged about $403.800 while new home sales in June were at 590,000.
The market did see a slight decline in existing home sales month-to-month than what sales were like a year ago during the same period. July sales for existing homes were at 20.2% from a year ago and down to 5.65% from July 2022. Pending sales were also slightly down by -1.0%. Home mortgage applications also saw a steep decline during July at 18.5% during July 2022 from a year ago for the same month, according to Fortune.
The slowdown of the market during the summer months isn’t anything new. Normally, the third quarter of the year (Q3) would experience a slight drop due to homeowners going on vacation, having the kids home from school, and people focusing on doing more renovations and remodeling projects to their existing homes.
When the pandemic was in full force in 2020, the housing market experienced a significant impact. While experts predicted the usual slowdown that was exacerbated by worldwide lockdowns, instead, homeowners took advantage of low mortgage rates to purchase existing homes and build new residences. Home prices skyrocketed due to this demand, which was further exacerbated by lumber shortages. Home prices skyrocketed by 20% in early 2020.
Also, the housing industry experienced an enormous gain in 2021 for single-family home and rental rates. Roughly 6.9 million in sales occurred in 2021 as there were historically low foreclosure rates and an increase in prices to 33% in 2021, states the Houston Association of Realtors (HAR).
Throughout 2020 and up into early 2022, experts predicted a housing market crash that would be similar to what occurred during the Great Depression. However, due to the unexpected demand that occurred inform 2020 up into early 2022, the market appears more stable.
Now experts are looking at the summer decline in housing sales to predict that the slowdown will continue for the remainder of 2022 and into early 2023. This slowdown means that home prices will only experience a slight increase.
This increase could average around 2.4% in the next 12 months, which is still lower than the price increases felt back in July 2022. Experts are also keeping a close watch on what the Fed will do regarding inflation and mortgage rates.
According to Yahoo News, the Feds went into a bond buying spree in 2022, which caused the financial markets to push mortgage rates from 3.1% up to a higher 5.7% for 30-year mortgages. This factor may lead to a housing correction where stringent lending requirements may slightly cool off rising home buying demands.
https://www.nar.realtor/research-and-statistics
https://www.har.com/blog_103311_housing-market-predictions-2022-2023-2024-2025-will-it-crash
https://fortune.com/2022/08/22/zillow-cuts-home-price-forecast-housing-market-2023-prediction/
https://www.yahoo.com/video/housing-market-correction-home-prices-195301195.html
If you’re wondering what’s going to happen in the construction industry this year, you’re not alone. The sheer unpredictability of the industry as a whole invites conjecture so that contractors can more easily stay on top of what’s coming down the road so that they can more successfully operate their businesses. In this post, we’ll discuss the top five construction trends in 2022, giving you the low down on what to expect this year and into the future.
Though new materials are constantly being developed and invented, the pace of innovation brought about by digital transformation is taking the industry through a golden age of materials science. The materials you may expect to see this year or shortly in the future include transparent aluminum to reduce structural weight while improving natural lighting and visibility as well as self-healing and flexible concrete formulations.
Both prefabricated and modular construction are seeing strong growth, partially due to the many benefits that can be realized using these technologies and building methods in construction. These benefits include reduced materials and shipping costs, reduced construction waste, higher overall quality of the finished structure, time reductions up to half of the time of traditional construction methods and reducing costs by up to 20%, causing growth expected to reach $157 billion by next year.
It’s not just fast-food restaurants that are short-handed these days, as labor shortages continue to plague the entire economy. For this reason, retaining good labor and hiring solid new labor is an important part of keeping your projects operating smoothly. Shortages make having skilled labor who can successfully, profitably finish your projects more difficult than ever. However, offering good benefits, training opportunities and competitive wages make the process easier, and robotic assistance is becoming much more of a reality on the construction site.
No longer the purview of computer geeks and engineers, 3D printing has come into its own in the construction industry. Known in commercial production as additive manufacturing, this production method can help you get through some supply chain issues to manufacture everything from replacement parts and components for your project to constructing modular and emergency or basic housing for a wide range of needs. They’re also useful for creating construction models featuring a high level of detail.
Unless you’ve been asleep at the wheel, you’ve probably heard the term digital transformation mentioned as it sweeps through every industry on Earth. It includes AI, machine learning, cloud computing, analytics, Internet of Things, pervasive networking and other technologies that work together to improve safety, efficiency, productivity and profitability on your projects. Newer technologies include robots that can handle bricklaying, cloud-based applications to improve crew communication, seamless workflows and document tracking for your company.
By staying on top of changes and trends in construction, you can more readily discover which technologies you should invest in early and which ones you should avoid to improve profitability. Check out our blog for more construction industry news!
Home design trends changed a lot during the COVID-19 pandemic. Spending time indoors and at home changed the perspective of many homeowners and home buyers, especially as the pandemic dragged out over the course of 2 years.
Functional, flexible spaces – spaces that can be used for spending time together with many members of the household – are more important than ever. Meanwhile, grays and neutrals have been replaced by bold, vibrant colors that lift the spirits and create eclectic environments. This makes spending time indoors with family easier on the eyes and easier on the spirit.
Whether you’re a builder of custom homes or a general contractor, you’ll want to keep an eye on these trends and be prepared to talk to your clients about these trends.
Open layouts are almost standard in new construction homes, but rarely found in older homes. Homeowners with homes more than 30 years old now regularly seek open layout conversions during their kitchen/living room and whole house remodels.
Recently, the downsides of open layouts have become apparent. Noise issues and inability to find privacy can be a problem. To combat these problems, hybrid layouts with a little more separation between spaces and more obvious zoning has become a standard request. Homeowners still like large, open spaces, but may seek more walls to provide privacy when it’s needed.
Being at home is best when the space is well-lit. Large windows overlooking open spaces and layered artificial lighting make home interiors more cheerful and attractive.
Lighting upgrades add value to the home while also improving quality of life. Expect to make lighting upgrades, window replacements and window installations that bring more natural light indoors. Homeowners remodeling their existing home will need coaching to help them design a functional, layered lighting system that works with their natural lighting to create an overall attractive home interior.
Many people who started working from home two years ago are back in the office, but a large percentage of the population continues to work from home – and they may keep doing this for years to come.
As this arrangement becomes more permanent, homeowners continue to seek out functional and private work-from-home spaces, including backyard ADUs, over-the-garage apartments and backyard additions. General contractors can expect to work with homeowners to create work from home spaces.
Gray and white were the preferred colors in home interiors for years. Today, homeowners want to see more color in their interior spaces. Bold colors like deep blues, sage greens, pops of red and teal are making their way into home interiors. To accommodate this new interest in bolder colors, some builders and remodelers can improve their customer service by offering color consultations.
Ultimately, COVID-19 has changed home design trends in clear ways. Builders and remodelers who gear their services toward these trends can continue to please customers. Staying connected with other builders and professionals in the industry can help. Exchange ideas and learn more at the next Global Exchange Events.
New home sales took an unexpected hit in the month of February in spite of increasing demand for single-family homes, dropping 18.2% from January’s numbers. Nevertheless, industry experts say they aren’t concerned about the housing market’s long-term fundamentals and have attributed this dip in sales to short-term factors such as rising lumber costs and material shortages. In this article, we’ll take a detailed look at the factors that have attributed to this recent drop in new home sales as well as discuss the housing market’s outlook for 2021.
After taking a look at February’s drop in new houses being built, one might assume that demand for new housing has taken a dip as well. However, housing starts are still up 30% year over year – and while February’s housing starts did drop 10.3% from their January total, demand for new housing is still high.
By and large, the factors causing new home sales to slow have much more to do with limited supply than slowing demand. In 2020, many mills were forced to either slow or halt production in order to comply with the new regulations and guidelines that were put in place due to the COVID-19 pandemic. At the same time, mill operators and lumber companies alike both drastically misread the market in 2020 and failed to predict the unexpected housing market boom that began last year. As this housing market boom has continued into 2021, mills and lumber suppliers have struggled to keep up with demand, leading to material shortages and skyrocketing costs.
In February, softwood lumber prices reached a point that was 110% higher than their highest point in February of 2020. These higher lumber prices have added a total of $16,000 in extra cost to the average price of a newly built home and have undoubtedly encouraged many would-be homeowners to hold off on their plans to build a new house. At the same time, though, even builders who have found clients who are willing to bear these higher costs are still struggling to procure the materials they need, and many builders whose services were still in high-demand last month weren’t able to meet that demand due to material shortages.
While the issues of soaring lumber prices and limited supply are certainly troublesome for many builders and home buyers alike, the outlook for the housing market going forward is still optimistic. It’s worth noting that in spite of the substantial dip in new home sales that we saw in February, the February 2021 numbers were still 8.2% higher than they were in February 2020 – an impressive figure considering the fact that the economic effects of the coronavirus pandemic had barely begun to make an impact in February of 2020.
While sales have indeed slowed more than expected so far this year, the materials shortages and high lumber costs driving this dip in sales are considered to be short-term issues that will largely resolve themselves in the coming months as suppliers ramp up production in order to meet demand. Realtors are also optimistic that the continued rollout of the COVID-19 vaccine will ease some of the seller apprehensions regarding the coronavirus and further improve supply. Demand for new homes is expected to continue growing throughout 2021 as well, thanks in large part to the fact that the millennial generation is just now entering its prime home-buying years; according to the National Association of REALTOR’s Home Buyers and Sellers Generational Trends Report, millennials now make up 38% of the nation’s home-buying population and are expected to continue driving demand for new homes throughout the near future.
All of this is to say that February’s drop in new home sales does not seem to be any reason for long-term concern, and the housing market’s fundamentals remain as strong as ever. While the high cost and low availability of lumber is certainly an issue for builders who have seen their operations slowed in spite of record-high demand, it shouldn’t take long for production to catch up. As the world slowly returns to some sense of normalcy and suppliers work overtime to make up for their missed projections, builders should soon be able to enjoy a market where supplies are readily available and the demand for their services is high.