Three Biggest Factors That Will Impact The Housing Market In 2022

written by Shaival Shah
     CEO and co-founder of Ribbon   
Jan 27, 2022

Housing Market

Brokers and agents across the country saw a boom in the market leading to houses selling fast and, sometimes, significantly over the list price. In fact, the price of homes in November 2021 was up 18.1% compared to November 2020.

As the housing market boomed, it was unsurprising to see home purchases by investors spike as well. From June-September 2021, an average of 25% of all home purchases were made by investors. A quarter of those came from large investors – with 100 or more properties. Newer methods like the iBuyer model also saw an uptick in use, but the collapse of Zillow’s program was a powerful reminder of the risk in that approach and the impact on the community downstream – iBuyers tend to put profit over people by opting to selling to investors than to everyday homebuyers who then lose out on intergenerational wealth building, child development benefits, and more found in homeownership. This continued growth in the investor market comes at the expense of these everyday homebuyers, but Power Buyer programs are empowering them with cash offers to stay competitive with a shrinking housing inventory.

The above are significant factors that will impact the housing market in 2022: Home prices will continue to increase, advancements in transaction technology – and the domination of the Power Buyer model for agents and lenders. I also believe we will see a greater variety of renting solutions arise this year.

Home prices are on the rise and Millennials are entering the market

The massive boom in housing prices over the last year will even out in 2022, but buyers can still expect to see a 3-5% increase. The likes of inflation and investor purchases have driven that level of increase in the past, but this is the year to keep an eye on Millennials.

Millennials struggle to enter the housing market, dealing with significantly higher educational debt than any generation before them. Throw in high housing demand and ever-increasing prices, and it’s no wonder a significant portion of them view renting as the only option. However, with remote work continuing to be the norm due to COVID-19, workers yearn for more space, so 28% of Millennials who do not currently own a home have said the pandemic has increased their interest in buying.  

As we see in U.S. communities every day, investors cause many people to lose out on home buying opportunities - but Millennials are savvy and I have confidence they will find ways to subvert a conventional offer’s outdated approach. We’ll see people aged 30-35 leverage new tools to keep today’s landscape competitive.

Real estate tech will grow toward transaction certainty

In a volatile market, certainty has become the essential factor in innovation - and capital is the primary driving force behind it. All-cash offers have been on the rise, but we will see them transform from an option into an expectation.

There are a number of tools currently available that address discovery, selling and other areas, but we will see these solutions begin to consolidate. Technology will continue to ramp up beyond discovery and be better able to address other areas such as offer-management systems, refined closing experiences, real estate brokerage, automation for mortgages and much more. Additionally, transactions will become more certain, faster and simpler as transaction-level data becomes more robust and refined.

The question is - will companies go vertically integrated, competing against the local ecosystem of agents, brokers and lenders in search of the pot of gold? Or will they be open, like few are, to support and facilitate those actors? My long-term bet is the latter.

More renting solutions will surface

An increase in home prices bodes well for sellers, but the other side of that coin is many potential buyers are getting priced out of the opportunity to own a home. Meaning the number of renters will be on the rise in 2022.

The difficulty is that renting costs are also increasing. In 2021, the cost of rent went up by almost 18% across the nation. The shortage of available houses and increased prices may be holding many people back but homeownership provides community and environmental stability while remaining one of the strongest investments a person can make. Renting can’t offer those perks to justify its rising prices.

As a result, innovators will strive to find new solutions that support renters on the road to purchasing a home. New solutions for rent-to-own or other hybrid renting/owning structures will fall into place to help drive competition and create opportunities for first-time buyers.

Overall, 2022 is going to be defined by innovation. As the industry continues to grow rapidly, buyers, sellers, brokerages and agents will seek better solutions to make the real estate world easier to manage and access. More importantly, as more solutions surface, we’ll see more incentive to prioritize homeownership –  and hopefully provide Millennials and members of underserved communities in particular with the tools to compete with investors for the American dream.

About the Author

Shaival Shah is the CEO and co-founder of Ribbon, a real estate software company simplifying the home buying process. Shaival’s passion for creating a level playing field for buyers, sellers and realtors combined with his own personal experiences in the home-buying process led him to create Ribbon in 2017. Prior to creating Ribbon, Shaival was SVP, Platform at Managed By Q, a workplace management platform.