Ribbon CEO predicts growth in three key areas.
No matter which side of the home buying process you’re on, selling and buying a home in 2021 was stressful and an experience unlike years past. According to a recent report, home prices nationwide grew by 17.2% in June 2021 compared to June 2020. In September 2021, the national number of homes for sale was 886,377, down 22.6% from years past.
This year we also saw the rise (and fall) of Zillow’s iBuyer offering — and we continued to witness investors snatching homes away from the everyday homebuyers. Within the first half of 2020, institutional investors spent a record $77 billion on home purchases. As an oppositional model to iBuyers, Power Buyers are now seeing growth this year by taking on the lack of inventory with “buy before you sell” models, and are giving first-time homebuyers an upper hand against Wall Street and iBuyers with cash.
While we all expect another unpredictable year in the real estate industry, there are several key areas, including home prices, technology and renting solutions, that I predict will all grow in the next year.
Home prices will increase and watch the Millennials
Home prices will continue to rise in 2022; however, they’ll do so at a much lower rate than we experienced in 2021. Instead of facing 20-25% increases in home costs, buyers can expect to see 3-5% increases. The continued growth is due to low inventory, inflation, Wall Street investment in many cities, and Millennials finally entering the buying market.
This last point is an important one. Millennials are still hanging on to the American Dream of homeownership. A reported 59% of Americans still aspire to be homeowners, however, 18% of millennials expect to rent forever, up 11% in 2018, according to a recent Apartment List survey. Aspirations and expectations haven’t matched up yet, though, due to increased education debts, record-high housing demand and overwhelmingly high home prices. However, that doesn’t mean they don’t want to purchase a home: COVID-19 has left nearly a third of millennials more interested in homeownership than before the pandemic.
Millennials and first-time homebuyers must leverage new tools to win their dream home and experience the belonging that homeownership brings. A simple offer is outdated and noncompetitive in today’s landscape. In 2022, expect competitive, multiple offer situations to be the continued normal – and even small changes in Millennials’ economic outlook to change the game even further.
Transaction Innovation is still in its infancy
Real estate is a $30 trillion dollar industry that has fought innovation for generations, until now. Capital is the new source of innovation, spurring modern home financing programs that unlock existing home equity, bridge between homes and deliver transactional certainty to all. All-cash offers have gone from being an option to a necessity.
Software is connecting all aspects of the transaction together to deliver on the process of one, unified place to manage the purchase and sale of a home. New transaction-level data will surface to make the transaction even faster, simpler and more certain.
Business models are shifting as quickly as the market itself. Some companies will become vertically integrated across mortgage, real estate brokerage, title, cash, transaction software. While others will power the ecosystem to deliver solutions to a built-in audience of buyers and sellers. We expect 2022 to bring significant consolidation in the real estate technology and proptech space.
Ultimately, the entire industry will optimize for one thing: certainty in the transaction.
Renting solutions on the rise
While we expect home prices to grow more slowly from what we’ve seen in the last year, it will not change the fact many people will not have the privilege to purchase a home, resulting in more renters. As home values increase, many homebuyers are getting priced out.
According to a recent Moody’s paper on the U.S. housing shortage, the availability of homes for rent and sale is the lowest in 30 years. Due to the community and environmental stability homeownership provides, the increase of rent compared to mortgage, and the importance homeownership holds for the federal government – America is not built nor destined to be a “renter nation.” However, home prices are growing faster than the median income – and each passing day creates a wider and wider gap. In 2022, we’ll see solutions geared to support renters to begin their homeownership journey earlier through brand new hybrid renting/owning structures.
With changes on the horizon and massive industry growth underway, homebuyers, home sellers, agents and brokerages will continue to look for innovative solutions in the housing market. As we continue throughout 2022, it’s critical not to disrupt this ecosystem of real estate. Instead, focus on empowering all those involved who prioritize homeownership.
This article is part of our HousingWire 2022 forecast series. After the series wraps, join us on Feb. 8 for the HW+ Virtual 2022 Forecast Event. Bringing together some of the top economists and researchers in housing, the event will provide an in-depth look at the predictions for next year, along with a roundtable discussion on how these insights apply to your business. The event is exclusively for HW+ members, and you can go here to register.
