Housing Market in United States

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housing market in united states

housing market in united states As a buy and hold real estate investor, market researcher and real estate syndicator, she believes it’s essential to understand demographic trends and migration patterns. Additionally, understanding where jobs are headed, and populations are growing is essential in deciding when to buy and when to sell.

housing market in the united states
housing market in the united states

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In this guide, Kathy will share over 28 housing market predictions for the years 2022, 2023, 2024, 2025 and 2026. She also answers one of the biggest questions investors ask every year: Will the housing market crash this year? And if not this year, when?


I’ve been obsessed with understanding market cycles and predicting what would happen with the housing market for decades, after watching my father get blind-sighted several times during his real estate journey. In fact, one of his challenges became my opportunity in 1996. Real estate values in California slowly declined after the 1990 oil price shock, debt accumulation from the 80’s, and growing consumer pessimism from high interest rates.

Dad was invested in an apartment in Marin County that lost value due to poor management during a brief recession, and it was subsequently sold at a loss. However, he had taken many tax deductions from that property over the years, which would be recaptured, unless he did a 1031 exchange. That meant he had to find a replacement property in just a few weeks time.

I jumped in to help him out, mainly to reduce his stress, as he had been hoping to retire. Paying the unexpected taxes would have made that impossible.

Rich and I found a 6-bedroom home that met the exchange amount, so we offered to turn it into a 4-plex, while living in one of the units. We would manage the property and pay for all expenses, in exchange for inheriting it someday (in which case the property basis would step up to market value, and the past taxes would be eliminated.)

Little did we know we had timed the market perfectly. It was the beginning of a run-up in real estate values in California. That property went up in value about $100,000 per year for 10 years straight!
In 2005, I was hosting a radio show in San Francisco, the Real Wealth Show, and had Robert Kiyosaki, the author of Rich Dad, Poor Dad as a guest. He explained that a credit melt-down was looming and a housing crash coming. How did he know, when so many others didn’t?

Simple. It was no secret that adjustable rate mortgages would be resetting in 2006, 2007 and 2008, and that many borrowers would not be able to handle the increased payments. He was certain that would lead to many foreclosures in California, as prices had gone up far beyond the ability of the average person to afford.

He told me he had sold all his California property and had 1031 exchanged into Dallas, Texas. He explained that many companies were moving to Dallas for the tax credits and affordability, and that was driving strong population growth. Housing supply could not keep up with demand and was still very affordable. In fact, it was 27% undervalued at the time.

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Rich and I followed his advice and bought nine properties in the Dallas area. We shared our story on the Real Wealth Show, and suddenly our phones were ringing off the hook with people looking to do the same. We shared our agent and property manager’s information, and helped hundreds of people sell their high-priced, low cash flow California property and 1031 exchange them for low-priced, high cash flow property in Dallas. Those properties in Dallas have since increased in value 4-fold, while cash flowing along the way.

This is why I’m obsessed with understanding market cycles.

Since 2003, I’ve been helping new and experienced investors purchase cash-flowing real estate nationwide, in real estate markets poised for explosive growth. I was one of the few who predicted the mortgage meltdown and subsequent Great Recession and encouraged thousands of people to sell their properties in the expensive “bubble” markets and 1031 exchange them for high cash flow properties in affordable, emerging markets.

From 2004-2008, I was a mortgage broker. It was obvious that something was very, very wrong. I remember turning in a loan application to a popular bank (that no longer exists today) and having the banker call to say the client didn’t qualify because they didn’t make enough money. I replied that I would let them know. The banker said, “Don’t worry. We changed his income so he qualifies now!”

I came home and told Rich, and asked him if he thought that sounded OK. He said, “No! That sounds like fraud!”

“Fudging” the numbers had become commonplace for borrowers, bankers and mortgage brokers. How could they not see that this would not end well? Mortgage brokers could give just about anybody a loan of nearly any size, with no money down, and no verification of income or assets. If I knew this kind of easy, careless lending was creating a bubble that would pop when those loans were due, how did executive in banking boardrooms not see it? In places like Las Vegas, the average home price nearly doubled in just one year due to this kind of easy lending!

When predicting the future, you have to be willing to see what others don’t.

Dallas, Texas had the opposite problem. Prices were undervalued compared to the average income. Wages, were growing much faster than home prices due to massive job growth in the DFW metro area.

I remember getting a call from a woman who had hoped to retire through real estate. She bought three older homes in the Stockton area, in a high crime area, and turned them into rental properties. The vacancies and repairs were eating up any income she received from rents. She told me she was done with real estate investing, because it didn’t work.

I encouraged her to sell these older, run-down properties in Stockton, California and 1031 exchange them, tax-deferred, for brand new homes in Dallas that cost $140,000 each. She trusted me and put the Stockton homes on the market. They sold for $420,000 each, even though they only rented for $1200 each! She was able to buy nine brand new rental homes in Dallas, Texas that each rented for $1,200! She quintuple her cash flow with that one financial move and was finally able to quit her day job.

Eighteen months later, when the real estate market crashed, the Stockton properties she sold for $420,000 were worth $75,000 each at best. That was, of course, one of the worst-hit markets in the Great Recession, because it was also one of the biggest bubbles prior to the housing crash. On the other hand, the Dallas properties never lost value, and in fact, have since quadrupled in value. She lived very comfortably off the cash flow over the past decade, as rents continued to rise in Dallas, Texas.

Many real estate agents say the three most important things in real estate are location, location, and location. While location of one’s property is very important when it comes to buying or selling real estate, I believe market timing may be even more important. That’s why I’ve offered my real estate market predictions every January, sharing what I believe will happen with the real estate market based on my many interviews with economists, 40-year veteran real estate investors and boots-on-the-street property teams and property managers nationwide.

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So far, since 2005, I’ve been right.

In January of 2020, I didn’t predict that a virus would knock down the economy, but I did tell my audience I expected a black swan event would hit soon that would shake things up. I’ll explain why I knew that later in this article.

In 2021, I didn’t predict that home values and rents would increase in the double digits, but I did predict that there would be greater demand for housing than there was supply, which would drive prices up. Other “experts” were predicting a massive housing crash due to millions of distressed borrowers during the pandemic. How could we have such differing opinions. I’ll explain later in this article.

This year, in 2022, I decided to dive in even deeper and provide housing market predictions for the next 5 years. While it’s really hard to predict what will happen next month, as a buy and hold real estate investor and real estate developer, we have to be able to see trends that may continue to drive real estate values and rents – beyond just one year.

My top 14 housing market predictions for 2022 are:

  1. The unemployment rate will stay low
  2. Job openings will continue to be over 10 million
  3. Inflation will remain higher than the Federal Reserve’s target of 2%
  4. The Federal Reserve will try to fight inflation by raising rates at least 3 times
  5. Mortgage rates will be over 6%
  6. Home prices will continue to climb, albeit at a slower pace
  7. There will be a slight uptick in mortgage defaults
  8. More people will choose adjustable rate mortgages
  9. Lending requirements will become tighter
  10. More people will choose to live remotely to lower their housing costs
  11. The suburbs and exurbs will become more expensive
  12. The number of renters and rental prices will rise
  13. Due to the November elections, there will be no real changes in taxes
  14. Investors will flock to real estate stocks

2022 Housing Prediction #1: Unemployment Rates Will Stay Low

My first housing market prediction for 2022 is that unemployment rates will stay low. In 2020 when we were hit by the Coronavirus pandemic, businesses were shut down and people were required to stay at home. Millions of people lost their jobs and unemployment rates soared. However, the Federal Reserve acted quickly in providing stimulus checks, business loans that didn’t have to be repaid, and generous unemployment benefits.

As a result, the savings rate skyrocketed in 2021. As the economy started to slowly and cautiously re-open, most metros saw at least 50% of those jobs return. The national unemployment rate hit 6.9% as of November of 2020. Today, most metros have recovered all their lost jobs, and in fact, there are now 11 million job openings!

The real problem we have today is not unemployment. It’s that we don’t have enough workers for all the available jobs! This will create inflation, as employers are forced to pay more to attract labor.

2022 Housing Prediction #2: Job Openings will remain over 10 million

Nobody knows for sure if we’ll see a resurgence of Coronavirus cases, but as of the first quarter of 2022, most mask mandates have been removed. Businesses have reopened. Countries have re-opened their borders to travelers, and life is slowing starting to come back to normal.

In fact, pent-up demand for goods, services and travel has created more orders than many businesses can handle. Thousands of factories were shut down during the pandemic, and they have been slow to re-open. Now they struggle to get employees and materials in order to keep up with demand. This has caused more material shortages worldwide.

For this reason, I predict we’ll continue to see low unemployment rates, along with continued wage growth.

2022 Housing Prediction #3: Inflation will remain higher than the Fed’s 2% target

The Russian invasion of Ukraine, a horrible crime against humanity, resulted in further shortages. Ukraine is considered “the bread basket of the world” yet their wheat exports are down to a trickle.

Countries who oppose Russia’s actions have imposed sanctions that hurt Russia financially, but also hurt those who rely on their exports. Russia has been a huge exporter of oil and gas, so energy prices have soared worldwide. Europe has been especially hard hit.

While the U.S. has oil reserves, it would take time to get drilling back up and running quickly. Many investors were hit hard when oil prices tanked in 2015, and are not eager to return to such a volatile investment. While the U.S. does not import much more than 4% of Russian oil, the crunch is affecting consumers at the pump.

Shelter costs represent a large percentage of how the U.S. government measures inflation. Rents have increased dramatically this past year, double any previous year, and over 15% nationwide. Some markets like Miami and Phoenix were up over 20%. Typically, rent increases are closer to 2 or 3%.

There were headlines in 2020 and 2021 predicting millions of foreclosures due to the millions of people being in forbearance. However, those headlines were misleading. While people were indeed late on their mortgage payments, they were legally allowed to stop paying if they were financially affected by the pandemic. The lenders agreed to add those lost payments to the end of the loan.

There were approximately four-million homeowners in forbearance in 2021, but that number has dropped to around one-million in 2022. The amount of inventory available on the housing market is so low today that even if these borrowers default on their loans, they would likely put their property on the market for sale rather than go through a foreclosure.

Zillow reported that U.S. housing inventory declined to 729,000 listings in February of 2022 – that’s 25% less than February of 2021, and 48% fewer listings than in February of 2020. This is the 5th consecutive month of declining inventory.

At the same time, the largest cohort of Millennials (ages 29-33) are forming households at record rates. Housing market experts are expecting there to be a massive wave of first time home buyers for the next three years, with limited supply to meet demand. That’s why rents and home prices are expected to continue to rise in 2022, fueling more inflation.

Additionally, the Fed increased the money supply by nearly 50% over the past two years in an effort to stimulate the economy after the pandemic flatlined it. With trillions of dollars created in such a short period of time, there is far more money circulating, which increases demand, and tends to drive prices up, creating more inflation.

2022 Housing Prediction #4: The Federal Reserve will try to fight inflation by raising rates at least three times

The Federal Reserve, the U.S. central banking system, fights inflation by raising overnight lending rates. They have stated that they plan to be aggressive in raising rates as much as seven-times this year and potentially by 200 basis points.

When money becomes more expensive with higher interest rates, the velocity of money slows down. When money becomes inexpensive, with lower rates, more people borrow and spend, which stimulates the economy.

The Fed lowered rates to near zero levels at the beginning of the pandemic, to stimulate the economy when the pandemic hit. The Fed also bought mortgage backed securities and bonds to keep rates low.

While Fed action may have been necessary in March of 2020, some say that the Fed did not stop quantitative easing soon enough in 2021, and instead stoked bubbles in real estate and stocks. The Fed stated that inflation was transitory in 2021, but in 2022 the Fed Board changed its tune.

housing market in the united states

It is very important to pay attention to how quickly the Fed raises rates in 2022. If they raise rates too quickly, it could shock the economy and usher in a recession. We are already seeing GDP slow down.

Higher mortgage rates will price many want-to-be home buyers out of the housing market. However, having fewer buyers is actually good for the housing market. Right now, many properties still have multiple offers over asking price, and inventory continues to decrease. Having fewer buyers is a good thing for prospective homeowners, because competition will decrease. On the flip side, many won’t be able to afford to buy a home. This will increase the demand for rental properties, which will drive rents up and contribute to inflation.

2022 Housing Prediction #5: Mortgage rates will be over 6%

As of April 13th, 2022, the 30-year fixed-rate mortgage hit 5% for the first time since 2011. The 10-year ARM (adjustable rate mortgage) was at 4.3%. As a result, there are more people looking for lower cost, adjustable rate loans.

While mortgage rates are not tied to Federal Reserve rate hikes, they are affected by the Fed’s quantitative easing.

The Fed has been buying $120 billion in Treasurys and mortgage backed securities to keep rates low and stimulate the economy. In so doing, they doubled their balance sheet from $4.4T to $8.8T.

Now the Fed is planning to reduce that balance sheet and reduce its bond buying to $95B per month.

With the Fed no longer acting as a major bond buyer, will another big buyer take the Fed’s place? If not, interest rates will increase to attract investors. In other words, mortgage rates are determined by investors. When investors seek safety, they buy bonds and MBS’s (mortgage backed securities.) When investors believe they can get better returns elsewhere, they put their money in stocks and real estate. Considering the increase in home prices that is expected to continue, investors see that they can make much more money in inflationary assets.

That means that in 2022, bond investors are signaling that they see more inflation in the future, and are investing in inflationary assets like stocks and real estate.

If the market for Treasurys and MBS is low, yields increase to attract buyers. High inflation will keep rates high. Don’t expect to see rates come down until inflation gets under control.

If the Fed succeeds in combating inflation, rates will decrease. However, it does not appear that will happen in 2022 – unless the Fed really puts on the brakes and raises interest rates at a faster pace than expected. Keep your eye on the Fed!

2022 Housing Prediction #6: Home prices will continue to climb

Rising interest rates will slow the housing market, and that is a good thing. Real estate was becoming terribly unhealthy in 2021, with short supply and increased demand.

Some markets like Boise, Idaho saw home prices increase by over 40%! This is due, in part, to all the Californians who were able to live remotely and move out of high-priced cities to more affordable areas. This is unsustainable and terrible for the locals who get priced out.

Another reason for rapidly rising home prices, is the historically low interest rates of 2021, combined with a large Millennial population forming households who desire to have more space after being forced to stay inside small apartments with small children for a year. (Yikes!)

Millions of people were able to work from home during the pandemic, and many employers learned new systems to make that possible. They also learned that they could lower costs by cutting back on office space.

Remote work has become the “new normal” since 2020. While many businesses are asking employees to come back to the office, many have reduced the number of hours required in the office.

They also discovered there are fewer illnesses when workers stay home and work from their bedroom when they are sick.

As a result, many employees with high-paying tech jobs have been given a new lease on life – to live wherever they want! They can now take their highly-paid city job and live in the suburbs or even in the country. Some people even learned they can live in their dream retirement location, while still working.

That’s why places like Florida have experienced a massive influx of people from New Jersey and New York. Home prices and rents continue to climb to accommodate people who can afford the elevated prices, because it’s much cheaper than where they were living before.

I don’t see this changing in 2022 or 2023.

2022 Housing Prediction #7 There will be an uptick in mortgage defaults

While mortgages in some stage of delinquency decreased to 4.65% in the 4th quarter of 2021, the number of properties filing for foreclosure was up 129% from last year. Foreclosure filings in February were up to 25,833, according to ATTOM Data Solutions.

Foreclosure activity remained low over the last two years, due to pandemic-related foreclosure moratoriums. Last year, the Biden administration extended the moratorium on foreclosures to July 31, 2021.

That’s why it’s no real surprise that foreclosure filings increased by over 11% from January to February of 2022. Double-digit increases will likely continue for the next six months, as the backlog of non-paying borrowers makes their way through the system.

These borrowers were protected for over two years, but now that banks can take action, expect a return-to-normal foreclosure activity. However, that “normal” is much lower than historic levels due to low supply of housing and strong buyer demand.

Some areas will be harder hit than others. Depending on state laws, it can take from a few months to a few years for a bank to repossess a property from a non-paying borrower.

The state with the highest foreclosure rate is New Jersey, with 1 in every 2,510 homes. Illinois took the second spot, with 2,126 properties in foreclosure. Ohio claimed third place, with 2,801 foreclosures. The states that rounded out the top ten of highest foreclosure rates in 2022 are South Carolina, Nevada, Maryland, Delaware, Indiana, Florida and California.

States with the lowest foreclosure rates are North and South Dakota, Alaska, West Virginia, Vermont, Oregon, Montana, Kansas, Kentucky, Washington, and Tennessee.

Home prices have shot up nationwide, and as mortgage rates increase, affordability will be out of whack in certain markets. This will slow down sales, and could hurt borrowers who need to sell their home, but can’t.

Most distressed borrowers have been able to put their home on the market and sell quickly, instead of letting their property go into foreclosure. However, some “stagnant” markets will feel the affect of higher rates, since they already have a smaller pool of buyers. We are already seeing an increase in delinquencies, primarily with those who have FHA and VA loans. FHA loans accepted lower credit scores and lower down payments on their loans.

Conventional loans were given to borrowers with the highest FICO scores seen in decades. Given the low interest rates they locked (many in the 3% range), high home equity, and strong wage growth, it’s unlikely we’ll see a high foreclosure rate nationwide in 2022.

2022 Housing Prediction #8 More people will choose adjustable rate mortgages

Home prices have shot up nationwide, but the pool of first time buyers is still high due to the massive Millennial generation. The largest group of Millennials are between the ages of 29-33, and are now forming households at an aggressive rate.

They are well educated and very independent. These potential Millennial buyers will be comfortable locking in a fixed-rate mortgage instead of dealing with higher rents, even if the rate is only fixed for seven to ten years, and adjustable after that.

As of April 16th of 2022, the 30-year fixed-rate mortgage hit 5.094%. That’s the highest it’s been in over a decade. However, the 7-year ARM is at 4.3%. The difference can mean the ability to buy a home or not.

Many young people may not be planning to stay in the home for more than seven years anyway. Given that adjustable rate mortgages are much cheaper than 30-year fixed-rate mortgages, we can expect more people to choose ARM’s over spending more of their housing costs on rising rents.

However, it’s important for borrowers to understand that their rate could increase once the fixed-rate period expires. For example, if a borrower gets a 5/1 ARM, the payment is fixed for the first five years and adjusts each year after that. It’s important to understand the terms, what the increase is tied to, and how much the payment can adjust.

There is certainly more risk with shorter term loans, as no one knows where the market will be in two, five or seven years. We don’t know what a home’s price will be in the future, or how high interest rates will go. It’s impossible to know if it will be easy or difficult to sell the home in the near future.

But based on charts from then last 60 years, home prices have continued to rise over the long term. That’s why long term debt tends to be safer, if you can afford it.

Given the shortage of homes on the market versus the strong demand, many borrowers are betting that prices will be higher in the future. Plus, they will have paid down a portion of the loan in that time frame, increasing equity.

Housing Market in United States
Housing Market in United States

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