Let’s Talk Real Estate – February 2022
In 2021 the housing market saw growth that we hadn’t seen in 16 years. Home sales and home prices both reached record highs. If you benefited from this surge, it depended on if you were selling a home.
The median-priced home saw double-digit growth in Jackson County over 2021 prices. Some months even saw and average of over 20% growth of the median-priced home. It depended on the price point of the home, but homes under $500,000 saw the most price growth percentage. Homes priced above $500,000 saw less price percentage growth, but still increased substantially over 2021 home prices.
Homes also sold at a record pace, with sellers often fielding multiple competing bids and all-cash offers. Many of the sold prices ended-up well over the asking price. If a home went on the market in the $200,000 or $300,000 range, the listing Realtor would often ask buyers to wait a week to turn in their offer in order to have time to get multiple offers.
For buyers looking for homes it was a different story. While mortgage rates kicked-off the year at record lows, it was difficult to even find a home to buy. Inventory of available homes below $500,000 reached an all-time low early in the year and competition was extremely fierce. Many of the prospective buyers left the market without a home to call their own. As a result, demand for rentals surged.
Without doubt, the real estate market went on a wild ride in 2021, so the question is now, what can we expect in 2022?
Sellers—While we are not likely to see the double-digit gains like that in the past year, prices are expected to keep rising in 2022 at a slightly more moderate pace. Interest rates are predicted to increase, driving those sitting on the fence to make a decision. Inventory is increasing but so is the number of buyers. In December of 2021 we saw 353 homes come on the market, up from 201 the year before. 349 homes sold in December, so nobody noticed the increase in inventory as buyers gobbled them up as soon as the homes were listed. Although still a seller’s market, the market is less active above the $500,000 level. For most sellers, it will be a wonderful time to sell.
Buyers Under $500,000—If you’re looking for a home priced under $500,000 you will face lots of competition and low inventory. Many of the prospective buyers who left the market without a home in 2021 will return in 2022 and try to buy before home prices increase and interest rates rise. Lawrence Yun, chief economist at the National Association of Realtors, expects the 30-year fixed mortgage rate to increase to 3.7% by the end of next year. The price of newly-built homes is being driven up, so in the $400,000 and under price category you will mostly only find older and previously-owned homes. Bottom line, low inventory, higher prices, and rising interest rates will face these buyers.
Buyers Over $500,000—The market cools a little for homes priced over $500,000. New construction slowed in 2021 due to labor and material shortages combined with rising costs. In 2022, we should see new construction increase, which will help inventory levels. The subdivision in the old Cedar Links Golf Course, the area at the end of Owen Street in Medford, and a new subdivision at King Street and South Stage, should all add more inventory in 2022. Interest rates will be higher, so the same monthly payment will buy less of a home. There will be more inventory to choose from, and prices will continue to climb so the sooner you move the better.
Renters—In Oregon, for most of 2020 and 2021, rent increases were frozen due to pandemic mandates. In addition, prices have increased on investment properties and inflation is upon us. The results of these three issues are that investors need to increase rents to maintain their return on investment. Oregon has rent control, so rents can only be increased by a little less than 10% on any current tenant but you should expect rents to go up.
Investors—We are seeing a record number of investors diversifying into the real estate market. Concerns of growing inflation and a red-hot stock market are driving the trend. In the past three calendar years, U.S. stocks have doubled so it’s no wonder Wall Street’s strategists unanimously expect tepid returns in 2022, and investors are diversifying into real estate. The projections see heavy growth in multi-tenant housing in 2022, so expect a hot market and lots of competition for investment properties.
The road ahead promises more growth in the housing market with prices and inventory both increasing. Add to this the fear of interest rates increasing and you have a formula for another record-breaking year. So, strap on your seat belts, lock your doors, and hold on for another wild ride.