This article is part of our HousingWire 2022 forecast series. After the series wraps early next year, join us on February 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.
By the fall, real estate agents in Boise, Idaho were passing around a video they didn’t like but couldn’t resist watching.
“Boise is in a full-fledged housing crash!” declared Nicholas Gerli, CEO of Reventure Consulting. Talking rapidly into the video frame, Gerli bandied about a Florida Atlantic University report that Boise homes purchased are overvalued by 80%, and city residents ought to rent. The managing partner of ACCEL Realty Partners in Boise, Steve Caporale, said that the video gave him pause, especially since, “The market has been softening a bit.”
2022 Forecast series
But — in the same beat — Caporale added, “There is still a massive influx of buyers, and I am not seeing a significant drop in demand.” The broker’s cautious optimism is echoed nationally. U.S. real estate in 2022 may see challenges to its biggest enterprises, including the National Association of Realtors and Zillow, and shifting adjustments to how work is done amid the coronavirus pandemic. But home sales or real estate prices dropping may not be in the cards.
“We just went through one of the biggest housing booms in modern history,” said Jonathan Miller, a real estate appraiser at Miller Samuel who also produces housing market reports for Douglas Elliman. “What we’re starting to see is more of a cooling or a plateauing than a market correction.”
How big? 2021 is projected to have the most home sales since the 2006 housing bubble, with the U.S. on pace for 6.29 million homes sold at the end of September, according to National Association of Realtors data. Moreover, 2021 was a historic year for home prices. By July, the median home price escalated to $362,800, up 15% from December 2020’s $309,000 median home price, which itself was up 15% from December 2019, according to NAR figures. July was the plateau. By September, home prices dipped to $352,800, per the trade group’s figures.
“The frenetic pace of the market has eased,” Miller said. “There’s buyer fatigue and real questions about affordability.” Slowing down the pace, Miller said, is the average interest rate on a 30-year-fixed rate mortgage — 3.09% by late October, according to Freddie Mac, after it hovered below 3% for most of 2021. Another factor is that real estate has partly returned to seasonal cycles, including a back-to-school lull.
“We’ve seen the fall be more of a normal fall,” said Mike Golden, co-CEO of @properties. Rising interest rates. Seasonal ebbs and flows. These are significant changes for real estate professionals but possible to plan for. Less predictable is what is next for 12 metropolitan areas that, per NAR numbers, really boomed, seeing an over 30% price climb from the second quarter 2020 to quarter two in 2021.
This includes Boise, which saw a 41% jump in median sales price during the period studied. But since June 30, prices have leveled off to about $530,000, according to data provided by Stacie Herrig, who is a Boise-based agent at Fathom Realty.
“While it’s still a strong seller’s market, there just aren’t the up-to-20 offers coming in on homes anymore,” Herrig said. “Sellers aren’t getting a free puppy or pony with their buyer’s offers any longer.”
“Some sort of balance or price stability is crucial,” Herrig added. Herrig hopes national homebuilders recently entering Idaho, including Shea and Lennar, can address inventory shortfalls. As agents prepare for the housing market’s next turn, they face choices about how to best do their jobs. Some heads of brokerages see a thru line from pre- and (hopefully, eventually) post-pandemic real estate.
“Obviously when COVID-19 hit we had to adapt tremendously, but I don’t think the home buying process has really changed,” Golden said. The Chicago-based brokerage has added five offices amid the pandemic, swelling its physical locales to past 40.
“Agents still need a space to work from,” Golden said. Lake Norman Realty, a brokerage headquartered in Cornelius, North Carolina, has also maintained its physical presence.
“We anticipate more brokers to return to their office desks as COVID numbers continue to decrease in our region,” said Abigail Jennings, president of Lake Norman Realty. “I haven’t had any brokers permanently working from home, and nobody’s ready to give up their desk yet.”
Other brokers, like Teri Pacitto of Sotheby’s Realty, said that while offices will remain, rituals “like long mid-day Wednesday meetings and breakfast being brought in” are thing of the past. U.S. real estate, however, is not known for its change.
The formula for the buyers and sellers agent splitting up a commission — and charging a total of 5-6% of the home listing price — has been around since before the First World War. The Justice Department is broadly investigating NAR, stating that American home buyers and sellers spend $85 billion a year on commissions.
DOJ has investigated NAR many times before. But NAR’s antagonism to federal antitrust officials — stemming from DOJ’s July 1 withdrawal from a consent decree between the parties — is unprecedented.
“This has set the groundwork for several years of the DOJ and NAR not working together,” said Ken H. Johnson, a real estate professor at Florida Atlantic University. “NAR could never trust this administration’s DOJ again.”
This article was first featured in the Dec/Jan HousingWire Magazine issue. To read the full issue, go here.
