Kevin's Predictions for the Q1 Real Estate Market

In 2021, low inventory and high prices dominated the real estate news. As we enter the first quarter of 2022, here’s what to expect out of the gate.?

The Q1 Generally Sees Fewer Transactions?

Few people shop for a new home over the holidays, and in colder regions, the winter months are generally not a popular time to search for properties or move. As a result, the Q1 has historically been a time when a higher percentage of homes are listed. This year will likely be no exception. But this isn’t the only reason inventory will grow in Q1.

FOMO Is Kicking In for Property Owners

In 2021, housing values reached new highs nationwide, and the neighbors were all watching! In 2022, the fear of missing out is bound to increase the number of people who put their homes on the market. This seems likely to positively impact the housing surplus and depending on how many people decide to take the plunge. But given that some people will just be listing their homes to speculate, some of the listing prices may lead to buyer remorse.??

People Are Still on the Move but Now Looking Beyond Commutable Distances?

In 2020, people fled high-density areas like San Francisco and Manhattan because they were suddenly afraid to get in the elevator with their neighbors. Many of these people bought in the outer boroughs or nearby suburbs and small towns, assuming they would eventually need to commute to work in a post-pandemic era.?

In 2022, people are still moving, but they are no longer moving for the same reasons or with the same restrictions. With many large companies announcing a permanent move to remote work, millions of Americans are now free to move wherever they like, and there are clear signs that they are beginning to take advantage of this newfound freedom.

After two years, many people, especially those with children, feel fatigued by the ongoing restrictions related to the pandemic. Even diehard urbanites are beginning to appreciate the appeal of a large home with a sprawling backyard and swimming pool. But where can you trade up from a small two-bedroom condo to, let’s say, a six-bedroom house with a pool? Also, where can the average person afford taxes on such a home? If you want the answer, check out the U.S. Census Bureau’s data on where Americans moved last year.

In 2021, close to three-quarters of a million Americans moved to Texas, Florida, and Arizona alone. In addition, less populated states like Nevada, Utah, and Idaho also experienced increases. Combined, these states attracted over 100,000 new residents. Notably, all these states are not only more affordable but also tend to have fewer restrictions related to the pandemic.?

So, what does this mean for 2022? If the outward migration from states like California and New York to places like the midwest continues, it seems likely that two things will transpire. The housing surplus will increase in some of the lowest surplus areas of the country. Also, this outward migration will likely push up prices in states that rarely, if ever, experience rapid surges in their housing values.?