For the last 8 years, the final Around the House column for each year normally discusses the forecasts and challenges for the upcoming year’s local housing market. Unlike others who make forecasts, I typically look back to see how wrong or right my forecasts were. In last year’s forecast, I concluded with the following statement:
Florida homeowners should expect higher property valuations and a tight real estate market as the months tick into 2021. If you want to buy a home in Florida, do it sooner than later as pricing and availability will be better in the first quarter prior to the implementation of widespread virus inoculations. By the end of 2021, Florida could be in a full-blown housing boom while large metropolitan areas languish in a significant downturn. 2021 should be a good year for housing and for those who own a home.
My forecast was almost perfect, and while some metro markets are not comparable in growth, their markets remain good, because overall national housing demand is strong. Plus, in the fourth quarter of 2021, housing prices and demand are edging toward boom levels.
Now let’s talk about the 2022 housing market, and I want to break it down into new home, remodeling, and pre-existing home sells.
New homes will be very tight with continued significant inflation. Housing starts in America will probably plateau in the 1.6 to 1.7 million range due to capacity, the ability to supply, and labor availability. Builders entering 2022 have huge backlogs that they are struggling to complete due to the inability to source material and labor. Nothing in material supply or labor looks to be going down in price, and builders are forced to raise prices almost monthly.
Due to slow housing production and the lack of capacity for the last decade, some analysts believe the American housing market probably needs 2 million plus starts a year for several years, and that is not going to happen without increased supply and labor. If you want a new home next year, contact a builder now as many builders have work lined up through the summer of 2022.
As the COVID-19 pandemic continues to improve, there is a belief by many that for the most part, the pandemic in America could be fully resolved by this spring, let’s hope. Many remodel projects have been put on hold for two years, and in the meantime, with housing inflation, many potential buyers will be forced to remodel because they will not be able to buy a comparable home at an affordable price. A lot of homeowners are getting locked into their current home because they received such a good deal on it in the last 15 years. This will bolster remodeling, along with the systemic changes of working and schooling from home which will fuel a demand in home office remodels. The home is becoming more than just a place to eat and sleep. It will now be the office, the school, and source of entertainment. Expect a huge boom in remodels with long wait times for remodelers.
Local pre-existing homes sales in 2022 will be very strong since many potential homebuyers cannot wait on a new home from a builder. Many older homes will be purchased and completely gutted and remodeled to get that new home feel. This will also fuel remodeling and add more demand to the supply equation. It is not out the question to see double-digit inflation in home prices once again, along with multiple offers on most homes above the asking price. The many cash buyers that are moving down from out of state have the upper hand as they can be offered better conditions, terms, and quicker closing than those who finance. Inventories on the market will remain low, probably less than 2 months, and during the housing season you could see inventory fall to virtually nothing.
What should you do if you are looking to buy a home or do a remodel project?
First, don’t hesitate. If you find a good deal anywhere, hop on it, and don’t delay. In many cases, houses will be selling the same day they are put on the market.
For construction projects, avoid special orders and design your projects with what is available from your local supplier. Special order projects can take months to deliver, and many remodelers just don’t have the time to spend on these long-drawn-out projects.
If you want a new home, don’t wait. Find a good builder, finalize your plans and details, and get your place in line. Nothing in the new home building process will be quick, and the longer you take making decisions, the farther into 2022 or 2023 you will be before you have your new home.
Finally, have patience in anything that involves housing. Lead-times will be extended, labor will be short, and prices will be up. If you lose your cool and become irate, be assured contracts and orders will be cancelled because many of the problems being seen in the construction industry are out of the hands of the providers.
Of course, a Black Swan event or crisis like another pandemic, war, or economic collapse could change circumstances quickly. On my Black Swan Radar is the Chinese economy and their emerging real estate crisis. A collapse in this area could drag much of the world down with it.
My Housing Crystal Ball for 2022 shows a housing and real estate market continuing to boom with higher pricing, longer lead times, and spotty shortages on materials and homes throughout the year. Don’t wait to make your housing decisions in 2022 or they will turn quickly into housing decisions for 2023.
I hope everyone has a safe and prosperous New Year.
Don Magruder is the CEO of Ro-Mac Lumber & Supply, Inc., and he is also the host of the “Around the House” Show which can be seen at AroundtheHouse.TV.