2022 Year in Review
December 14, 2022
2022 has been a year of change for all, and the real estate industry is no exception.
Much of the world has moved away from pandemic restrictions while still maintaining a lot of the changes and conveniences brought about as a result of the COVID-19 pandemic.
There have been ongoing economic challenges highlighted by rapidly rising inflation. The invasion of Ukraine has added further strain on already weakened supply chains.
With all that’s going on, it’s important to take a step back and understand where we are and how we got here. It’s time to review 2022 from the real estate industry point of view.
Rapidly Rising Interest Rates
From early 2020 until this spring, interest rates were among the lowest they had ever been. Buyers were flooding into the market to take advantage of cheap debt. Current homeowners were refinancing to lower the amount they were paying on interest. Among other factors, low rates helped drive the boom in real estate prices over the last two years.
Of course, not all good things last forever. In the face of the highest inflation seen in decades, the Fed has been forced to raise rates, which feeds directly into the mortgage rates for homebuyers. This has led to reduced demand and, after years of rapidly rising housing prices, September saw the first monthly decline.
Where interest rates go in 2023 will be a big driver of what happens in real estate. Will the Fed stay on the path to higher rates at a faster pace? Will they take a slower approach? Will they pivot entirely? The economic data will ultimately drive the decision-making process and everyone from realtors to mortgage brokers to title insurance providers will be watching with great interest.
Digital is Here to Stay
Although society is moving away from pandemic restrictions, many of the practices adopted during the pandemic are here to stay. In the real estate industry, technology took the lead as restrictions and safety measures collided with a hot market filled with buyers wanting to view and purchase homes.
While the traditional in-person walkthrough and viewing is still a popular choice, most homebuyers are still starting their journey online. 3D walkthroughs, videos, and other digital tools that can provide an open-house experience are now must-have tools for realtors when listing. It’s like having a 24/7 open house and helps buyers narrow down their search before having a single in-person viewing.
The same trend is true for other digital processes in the real estate market. Digital signing is still incredibly popular for both clients and businesses. The convenience and time saved through digital signing is preferred by many, especially as younger generations are entering the market.
With that said, there are still opportunities for processes and regulations to catch up with technology. Looking ahead to 2023 and beyond, it’s possible that a completely digital closing process from beginning to end will become available. The real estate professionals with the right tools to implement these developments immediately will have an instant leg up on the competition in their market.
Changes in Regional Demand
As real estate prices rose during the pandemic and demand for housing surged, many people were priced out of the big coastal cities they lived in such as New York City, San Francisco, and Los Angeles. The growth of permanent remote work opportunities led by big companies like Spotify and Twitter gave people the ability to move to different cities and states without having to change their job or career path.
Many midwestern states were the ultimate beneficiaries of this flight away from high-priced real estate along the coastlines. This begs the question if the trend will continue moving forward and if those who already made the move will stay in their new cities and towns. If real estate prices continue to drop in 2023, could some people be convinced to move back to the cities that they left behind during the pandemic?
It’s too early to make a prediction on how this trend will turn out in the long term, but it’s clear that there is a point where people are willing to move around the country seeking more affordable real estate.
A Focus on Housing Affordability
The rapid rise in housing prices throughout the pandemic has put an increased focus on housing affordability as many people are finding they cannot afford a home of their own. The rise in rental rates is not helping either because people feel the pinch whether or not they want to be a homeowner.
Although prices have started to drop, it’s quite possible that those gains seen during the pandemic are never fully unwound. Along with rising inflation and higher interest rates, the affordability question will likely be one looking for an answer for many years to come.
Politicians have been trying to find ways to get new buyers into the market where it has been hard to compete with offers from those with more cash or equity in existing homes. For example, a bill was introduced that proposes a $15,000 tax credit for first-time homebuyers. However, this bill has yet to pass and it’s uncertain when new homebuyers will be able to benefit from the proposed credit.
The supply side of the equation has also continued to struggle, which has provided constant upward pressure on prices over the past two years. Even as interest rates rise and buyer demand falls, homebuilders struggle to find the materials and labor needed to meet long-term demand. Will post-pandemic real estate be an industry constantly battling low supply or will this be resolved in 2023?
Cheers to 2022
We will leave our crystal ball and predictions for the new year in the storage shed for now and, instead, take this moment to thank the many people and businesses that we have worked with over the past year. 2022 was another successful year for Janus Title and provided countless opportunities to help real estate professionals and their clients close their deals quickly and efficiently. We’re grateful for our partners at Qualia Connect that have allowed us the ability and technology to deliver on our vision.
Here’s to 2022 and our best wishes for the year ahead! We look forward to hearing from you as 2023 kicks off!
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