On Thursday, January 13, we hosted our 2022 Market Outlook event. Three leading real estate economists forecasted what we can expect for the year ahead. Lawrence Yun, National Association of REALTORS®, Danielle Hale, realtor.com®, and Brandon Svec, the CoStar Group, provided their insights into the residential and commercial real estate markets in Chicago and throughout the U.S.
What can you expect from 2022? We gathered five takeaways from the event to help you get a jumpstart on the year.
The Worst of the Inventory Strain Has Passed, But Inventory Will Still Be a Challenge
As we’ve seen over the last few years, there has been an inventory strain not only in the Chicago market but also nationwide, as the number of homes for sale is not meeting homebuying demand. However, “I believe the worst in inventory has now passed,” Dr. Yun said.
Dr. Yun is hopeful that there will be more inventory by springtime due to a variety of factors. Supply chain disruptions will diminish, which will help increase new home constructions, some buyers will trade up, therefore selling their current homes, and the Mortgage Forbearance Program will end, forcing those with mortgage delinquencies to sell their homes. But, demand is likely to remain high, and while these new streams of inventory will help ease some demand, they won’t solve the inventory shortage problem completely.
Svec echoed this on the commercial side, saying, “We’re seeing a healthy amount of supply come online, but demand has just been so strong that it can’t keep up.”
Mortgage Rates are Anticipated to Rise
“I think we are going to see a steady march upward [for mortgage rates] throughout 2022, and that is going to present a challenge for homebuyers,” Hale said. Dr. Yun agreed, noting that inflation is the biggest cause of this anticipated rise.
For REALTORS®, Hale had tips to help “rate proof” your homebuying client’s budgets. This means not only incorporating current mortgage rates into your client’s budget, but also anticipating what could happen if mortgage rates have a sudden increase, and how that will affect their budgets.
Affordability Challenges Ahead
Nationwide, there are just under 46 million people in the first-time homebuying window, which Hale describes as those between the ages of 26 and 35. Typically, these buyers look for more affordable options when purchasing their first home. And, with both rising home prices and rising mortgage rates, 2022 homebuyers will be looking at higher monthly payments, affecting affordability for these buyers.
Dr. Yun added, “First-time buyer demand is strong. Unfortunately, high home prices, and now rising mortgage rate and lack of inventory on the starter home is really hindering the first time activity.”
Rent Prices Will Continue to Increase
When looking at the commercial and multi-family market, “We are expecting rents to continue to grow at an above-average pace, just not quite the same blistering pace that they grew at in 2021. So overall, in 2022, we’re expecting rent growth in the Chicago region to be slightly higher than 6%…,” Svec said. Downtown Chicago is seeing the highest submarket rent growth currently at 14%, while the lowest rent growth was in far north Chicago at just 1.3%. However, rising rent is a nationwide issue, with some cities seeing as high as 25% rent growth last year.
Despite Challenges, 2022 Will Be a Great Year for the Market
All of our presenters believe 2022 will be a great year for the Chicago real estate market, falling just short of the successes we saw in 2021.
“If you thought 2021 was a great year, 2022 will match 2021,” Dr. Yun said.
“The real estate market we expect to remain dynamic,” Hale echoed.
Download the Presentations
Watch the Event
- Dr. Lawrence Yun’s Presentation Begins at 19:03
- Danielle Hale’s Presentation Begins at 50:30
- Brandon Svec’s Presentation Begins at 1:14:54
- The Q&A Featuring Our Presenters & Moderator Dennis Rodkin Begins at 1:37:15