The housing market nationwide and throughout the Philadelphia area has remained robust during the pandemic, a trend that is expected to continue into the new year.
Real estate leaders are feeling better about the future than they were last year, according to a report by the Urban Land Institute and accounting and auditing firm PwC US.
Despite the rise in COVID-19 cases which underscores the pandemic is not ending, “I still think it’s going to be a great year for real estate,” said Christopher Sample, associate broker at Able Real Estate based in West Philadelphia and chairman of the Realtist Philadelphia Metropolitan Council.
So what can home buyers and sellers expect in 2022? An unprecedented health crisis makes the future even more uncertain. But economists and housing experts are quite optimistic about the year ahead.
Homebuyers in 2020 and 2021 have faced increased competition, bidding wars and inadequate housing supply, all of which have helped push home prices to record highs. Prices will continue to rise in 2022, but compared to 2021, they are expected to grow more slowly – from double-digit growth to single-digit growth.
Nationwide annual home price growth set a record 24% in May 2021, according to Redfin.
Across the country, median home prices will increase 5.7% in 2022 from 2021, according to a survey of more than 20 economics and housing experts by the National Association of Realtors.
Danielle Hale, chief economist at Realtor.com, predicts that nationally, prices will rise at a slower rate – about 3%. This is in line with Redfin’s forecast. Hale predicts the same price increase in the Philadelphia metro area, which includes Camden and Wilmington.
Housing affordability will continue to be a concern, and without government and private sector intervention, housing gaps based on race and socioeconomic status will widen, according to the Urban Land Institute and PwC US.
“Affordability is going to be the factor that really drives a lot of housing decisions,” especially for young first-time buyers who have less money saved and no funds coming from a home sale, Hale said.
And although prices will continue to rise, more potential buyers will be employed, incomes will gradually increase, and employees will be able to choose to live in more affordable areas due to the flexibility of the workplace, she said. The Philadelphia region will remain attractive.
“Compared to the main East Coast markets,” she said, “it’s much more affordable.”
READ MORE: Median home prices in the Philadelphia area have risen 48% in the past decade
But the townspeople will continue to experience difficult times. Sample, of Able Real Estate, said he saw homes in West Philadelphia that cost around $ 260,000 that a resident could have bought in 2000 for $ 90,000.
Prices “are moving at a simply incredible rate,” he said.
For homeowners, Zillow predicts that the the value of a house at the median price will increase by about 14% next year – down from a record high of around 19% this year, but among the strongest years the company has followed. The median home in the Philadelphia metro area is valued at $ 311,614, up 15% from a year ago, according to economists at Zillow.
Mortgage interest rates fell in 2020 to all-time highs, then fell again early this year. But they have made progress. As of Dec. 16, the average rate was 3.12%, up from 2.65% in the first week of 2021, according to the government-sponsored government. mortgage financier Freddie Mac.
And rates will likely continue to rise in 2022, as the Federal Reserve plans several interest rate hikes in an attempt to control inflation. Economists predict that the average rate will rise to 3.5% or 3.6% by the end of next year. This is lower than the pre-pandemic rate of 4% and still an all-time low.
The rate hike will mean about $ 100 more per month in mortgage payments for the median price home, according to Daryl Fairweather, chief economist at Redfin.
She said the rate hike will help slow home price growth, which will give first-time homebuyers a better chance to succeed in the market.
Sales have been strong during the pandemic, and this trend will continue. In 2022, sales in the Philadelphia metro area are expected to increase 4.7% from 2021 sales, according to Realtor.com.
Nationally, Realtor.com predicts that existing home sales will increase 6.6% in 2022 compared to 2021, which would bring sales to their highest level in 16 years. Zillow predicts more than 6.5 million existing home sales in 2022, the highest number in any year since 2006.
Millennials are the largest generation of home buyers and will continue to generate a significant share of home sales over the next several years as they continue to form households. They represent more than half of potential buyers who plan to buy their first home in the next year, according to Realtor.com.
Low interest rates and the pandemic have heightened demand among this generation, who continue to enter their early years of first-time home buying. More than 45 million millennials are between the ages of 26 and 35, a key range for first-time home buyers, Hale said.
So far, the economy has rebounded beyond expectations and economic output is expected to peak for decades by 2022, according to the Urban Land Institute and PwC US.
Homebuyers remained interested in living in cities, including Philadelphia, despite predictions at the start of the pandemic that homebuyers would reject urban areas due to the health crisis. But Risco said she sees a large chunk of people “flocking” to Delaware and Bucks counties for their school systems and out of a belief that these places are safer than Philadelphia.
Hale, at Realtor.com, said that nationwide, suburbs will continue to generate inordinate interest in a trend that preceded the pandemic and accelerated during it.
“The housing shortage that we are experiencing has been in the works for a long time,” Hale said. So the problem will not go away quickly.
The supply of housing hit record highs in 2020 and remained weak in 2021, thanks to a decade of slower-than-normal housebuilding, potential sellers feared finding a new home after the sale and increased demand for homes. buyers.
READ MORE: The supply of homes for sale around Philly is expected to remain low for some time
The 35 largest housing markets, including Philadelphia, have issued permits for a total of 1.35 million fewer homes since 2008 than if permits had kept pace with historical standards, according to Zillow.
But buyers can look forward to some relief in 2022. Builders across the country are building homes at an unprecedented rate for 15 years, which is “pretty impressive given all the hardships” they face. to access materials and labor, Hale said. She predicts that single-family home starts will increase by 5% in 2022 compared to this year.
There are 28% more single-family homes under construction than a year ago, said Robert Dietz, chief economist at the National Association of Home Builders.
And while sellers are still struggling to find a home to move into, more homeowners are planning to enter the market next year. This fall, Realtor.com surveyed 1,300 consumers across the country and found that one in four homeowners said they plan to sell their home in the next 12 months. It is against one in 10 in the spring.
READ MORE: Homes For Sale In Philly Area Are Going Fast
Fairweather at Redfin predicts that new listings will peak in 10 years next year, surpassing the peak of 2018, with 7.6 million homes put on the market. Homeowners should find listing their home while looking for a home to buy is less intimidating as the market clears, she said.
That doesn’t mean buyers will be out of the woods in 2022. The record listings don’t match the housing shortage, Fairweather said. For example, members of the younger generations who are just starting out and the older generations who are living longer and downsizing compete for the same sizable houses.