The real estate market constantly evolves, with new trends and innovations shaping our favorite housing markets every year. Last year, we saw quite a few noteworthy trends come to the forefront of real estate - from shifting work-from-home dynamics to the rise in virtual home tours.
But what does this year hold in store for us? Join us, the Park Regency team, your trusted real estate agents in the San Fernando Valley, as we dive into five real estate trends for 2022.
2022 Real Estate Trends
1. Home Prices Won’t Slow Down
Whether you are a seller, buyer, or investor, you will be disappointed or pleased to learn that home prices will rise across the U.S in 2022. No wonder a significant percentage of Americans face housing affordability challenges.
According to Zillow, the national average home value hit $325,677 in Jan 2022— a 19.9% increase over the same time last year. Further, the website predicts a 17.3% increase in home value in the next year. The San Fernando real estate appreciated by a whopping 142.62% in the last ten years. That equals an annual appreciation rate of 9.27%.
Home prices are rising because demand has far exceeded supply. Dwindling inventory will force buyers into bidding wars and push prices beyond their reach in some areas. Other issues that factor in this trend include increased costs of building materials and a significant shortage in labor.
So, should you buy now or wait? Well, if you currently have the means to buy a home, you will likely be more concerned with the pricing factors, such as mortgage rates. But first-time buyers will have to contend with more profound issues such as higher down payments. Millennial and Gen Z homebuyers save more money or opt for more affordable suburban or rural areas.
Whether you want to buy your dream home in your preferred San Fernando neighborhood or invest in the local real estate market, we highly advise using the help of a competent real estate agent.
Established San Fernando realtors know the ins and outs of the local market and can leverage their experience to help you make informed and strategic decisions. For professional assistance with your San Fernando real estate transaction, feel free to contact Park Regency.
2. An Upward Trend in Rental Prices
Renters have not been spared. According to the U.S Government Accountability Office (GAO), the number of rent-burdened households increased by about 6% between 2001 and 2017. In 2021, The Guardian reported that nearly 50% of American workers could not afford a one-bedroom rental. Nationwide rental prices have increased substantially, with one-bedroom and two-bedroom apartments averaging $1,688 and $1,985, respectively. That represents a corresponding year-over-year increase of 22.6% and 20.4%. Cities that have seen the most significant increase in 1-bedroom rent in the past year include:
- Gilbert, AZ (108.5%!)
- Long Beach, CA (55.7%)
- Huntington Beach, CA (49.2%)
- Jersey City, NJ (46.6%)
In San Fernando Valley, a studio apartment will set you back around $1,990 per month. Renters considering one-bedroom units can expect to pay an average of $2,544 monthly.
But despite the rent increase in the U.S, the occupancy rate of professionally managed apartments hit an all-time high of 97.5% in January 2022. That’s good news for property owners and potential real estate investors. However, the trend means limited options for renters looking to relocate.
3. Mortgage Rates are Rising
Mortgage interest rates are going up after months of hovering at record lows. According to Freddie Mac data, the average 30-year fixed mortgage rate stood at 3.92% in February 2022 — up from 2.81% a year ago. Over the same period, the average 15-year fixed mortgage rate increased by 0.94 percentage points to 3.51%.
Rates have been ticking upward as the 10-year Treasury bond yields rise due to inflation fears. Keep in mind that the Federal Reserve is set to increase its benchmark interest rates starting from March 2022 in response to the growing inflation and employment market.
Even though the mortgage rates are still low compared with 1981’s historical average of 16.63%, they will still substantially impact potential homeowners’ purchasing power. Undoubtedly, borrowers will get smaller loans than they would have just a few years ago. With higher rates and growing San Fernando Valley real estate prices, borrowers will likely pay $100 more per month on a new mortgage compared to last year.
As experienced San Fernando realtors would advise, while you might be itching to lock in the seemingly low mortgage rates before they rise further, make sure you're financially stable enough to take on such a big commitment.
4. Infiltration of Crypto in Real Estate
2021 saw a sharp rise in cryptocurrency use in real estate transactions. A 2021 Redfin survey found that nearly 12% of first-time buyers used their crypto holdings to purchase their homes. As millennial and Gen Z buyers dominate the real estate market, we expect crypto to become a key driver of down payment savings for people without generational wealth.
However, there are still some hurdles in using cryptocurrency for real estate purchases – primarily due to federal restrictions.
You cannot just transfer over your crypto investments or show your account balance to satisfy the requirement for proof of funds. Neither can you pay your closing costs with digital currency. For that reason, you must cash out your crypto investment into a bank account. And because lenders require a 30-60-day transaction history, make sure to convert your digital coins early in the real estate process.
5. Increased Focus on Built-to-Rent Homes
With mortgage rates and home prices rising, many first-time buyers are priced out of the San Fernando Valley real estate market. Take Porter Ranch, one of the wealthiest San Fernando Valley neighborhoods, where the median list price has skyrocketed by 20% to $1.1m over the past year.
An excellent alternative is build-to-rent homes (B2R or BTR), homes explicitly built for long-term rentals. They help eliminate the problem of mortgages and costly home prices, providing people an opportunity to live in a nice place without stretching their budget too thin.
Most build-to-rent properties are ultra-modern, providing more energy efficiency and pros like underfloor heating. Additional perks include:
- Lower transaction costs than purchasing MLS-listed homes
- On-site leasing and property management
- Lower maintenance costs
The numbers don’t lie. The National Association of Home Builders reported that 37,000 homes in 2017 were rentals. A year later, the figure grew to 43,000!
The concept has penetrated the single-family homes market.
Traditionally, single-family units targeted mature individuals with families willing to commute from the suburbs to the city. That has since changed, with people across all ages moving into suburban and rural areas. And with remote working becoming a norm, renters looking for a lower cost of living and higher quality of life prefer single-family homes with urban-like amenities in less crowded locations.
Bottom Line
There you have them - the top real estate trends for 2022. There will undoubtedly be challenges. But also plenty of opportunities for those armed with the knowledge to maneuver them.
All in all, we at Park Regency are very excited for this year and look forward to helping our San Fernando clients make informed decisions for their real estate goals. Our San Fernando real estate agents walk with you every step of the process. From creating MLS listings that match your preferences, detailed online property searches, to superb photographs and virtual tours that show off the best of your home to completing the required paperwork.
And whether you are a beginner or seasoned investor, we will be happy to help you tap into profitable opportunities that level up your real estate investment portfolio. For more about our real estate services, contact our team at 818-363-6116.