Alabamians became all too familiar with the aggressive housing market in 2021. From rejected offers and competition with cash buyers, to historically low interest rates and accepted offers above asking, there were benefits to some and losses to many. That being said, housing affordability remains a concern.
Although inventory shortages may persist, a group of 20 leading economist expressed overall belief that the housing market and broader economy will normalize over the next year, expecting existing home-sales to decline to 5.9 million instead of the 6 million estimated sales last year. Housing starts increasing to 1.67 million as the shortages and backlogs subside will also contribute a settling market.
National Association of REALTORS® Chief Economist Lawrence Yun said during NAR’s virtual Real Estate Forecast Summit, “slower growth in home prices, decelerating inflation, and multiple interest rate hikes by the Federal Reserve could contribute to a more normal housing market in the new year.”
Additionally, as experts continue to predict the trajectory of the future housing market, 10 “hidden gem” markets were listed for 2022, 100% of which are in the South and 20% in Alabama – Huntsville and Daphne-Fairhope-Foley markets made the cut as areas with more room for growth.
Finally, there are a few demographics that point to a slow-down in the future housing market:
- Baby boomers want to age in place and will continue to hold onto their homes, contributing to the ongoing inventory shortfall.
- Millennials are the largest generation of potential buyers, but they face significant headwinds, such as low inventory, high prices, and student loan debt.
- A drop in the birth rate to a 100-year low could contribute to continued stagnation in the market: The birth of a child is often a motive to buy, and a child moving out is often an impetus to downsize and sell.
Ken H. Johnson, associate dean of graduate programs at Florida Atlantic University stated that regionally, “everyone will experience moderation, but there will be differences.”
Sources: Experts: Housing Market Likely to ‘Normalize’ in 2022 REALTOR® Magazine (December 16, 2021) Catherine Mesick, 10 Markets Called ‘Hidden Gems’ for Real Estate in 2022 REALTOR® Magazine (December 15, 2021)