2022 REAL ESTATE MARKET OUTLOOK
As we head into 2022 it is impossible not to get caught up in all of the news surrounding our economy. Real estate is always a vital part of the economy and our specialty so that is what will be focused on in this article. Whether you are renting or thinking about buying or selling the real estate market is something you are paying close attention to and we hope to help guide you a bit.
There are many different factors that affect the state of the economy and we are hearing about these things daily. In December the Unemployment Rate was back to the same number as in March of 2020. These numbers are a bit deceiving, however, because we are down 3 million in the job count nationally. Arizona, however, has seen growth since March 2020 in the labor market, unlike most states across the country. Inflation is also a word that we are hearing a lot and with good reason. We are seeing the highest inflation in 40 years in the United States. Americans are paying more for everyday items and are worried about their different investments. Historically real estate has shown to be a way to hedge investments over inflation as shown in the chart below provided by the National Association of REALTORS®.
Of course we have no crystal ball but we do follow trends and trusted economists to help us come up with the best market forecast we can. We do believe, along with most economists, that the real estate market in 2022 will be very similar to 2021. In 2021 we struggled locally and nationally with supply issues. The low inventory inevitably forced pricing up. There is more building occurring but it is still lagging due to the supply chain disruptions. This trend will, likely, continue through 2022. People are constantly asking us when we will see a “crash” like we did in 2012. The answer is that we won’t for many reasons. The main reason is that there was a halt in the predatory lending we saw in the early 2000’s.
Also, with interest rates at record lows over the past few years, most mortgage payments are very manageable for current homeowners. Also, most homeowners have enough equity in their homes to sell before they have to foreclose. In 2005 there was a lot of building going on and too many houses were constructed giving us too much supply in the market. We, clearly, don’t have this problem right now. People will always need to sell for varying reasons but overall we will continue to see a squeeze in inventory.
In 2022 we will see mortgage interest rates rise. The Federal Reserve has stated that they will raise interest rates, which will raise mortgage rates. We will likely see mortgage rates around 3.75%. Inflation will have the biggest impact on what the interest rates do so we will be keeping a close eye on that.
We will continue to see new buyers entering our market at a strong rate. Many people are retiring and moving to Arizona. People are able to work from home and, therefore, able to live where they choose. A lot of these people are coming to Arizona. Arizona as a whole has created a lot of jobs and has a lot of industry coming to the state. This will bring a lot of second home owners to us locally in Flagstaff to add to our already saturated second home market.
Nationally, home prices are up 14% over 2021. Locally, as you will see in the following pages, our local market saw home pricing go up just over 21%. 2022 will be very similar but we should see a drop in the number of homes sold due to lack of inventory and the rise of interest rates. All in all it will continue to be a great home to list your home if that has been on your mind.
Please remember this is all a very educated projection. We at Best Flagstaff Homes Realty do all we can to stay very educated and up to speed on our local and national real estate markets. Please don’t hesitate to reach out if you have any questions as we are always eager to talk real estate!
BEST FLAGSTAFF HOMES REALTY TEAM TIDBITS
FIRST FRIDAY ARTWALK
Join the Best Flagstaff Homes Team for the Friday Art Walk on February 4th at 6pm. We will be hosting Happy Camper Artwork by Flagstaff artist Linda Davis and collecting donations for Flagstaff Shelter Services. Items such as TP, disposable razors, toothbrushes, big black trash bags are needed. Linda has also been so kind to donate one of her paintings to be raffled to a lucky winner. Every item donated will receive a raffle ticket or you can buy some: $1 each, 7 for $5 or 15 for $10. If you are unable to join us for Art Walk please come by Monday-Friday from 10-2 and get your raffle tickets then. We will be collecting items and selling tickets until February 11.
The Best Flagstaff Homes Team loves to give back to the community and the past year we have very much enjoyed donating our time and sometimes our funds to the following organizations. We are especially proud to have contributed $14,150 to the Northern Arizona Housing Fund through escrow donations!
BUYERS & SELLERS PROFILE for 2021
Each year, the National Association Of Realtors® conducts a survey of Buyers and Sellers to gain insight into trends and behaviors of those in the real estate market. This year marks the 40th anniversary of the survey, the first of which was completed in 1981. It’s especially interesting to compare trends from 1981 with those of today. For example, in 1981, 22% of home buyers used a newspaper to search for prospective homes, while just 7% did in 2021. Of course, this is a result of technological advances, with 95% of today’s homebuyers instead beginning their search on the internet.
One key market indicator is the number of first-time buyers that decide to enter the market, as more individuals entering the market ultimately leads to long-term market health as they upsize, move-up, or downsize in years to come. Over the past year, first-time homebuyers made up 34% of the marketplace, up from 31% in 2020. This is still lower than the historical average of 40% however. This has been the case since 2011, as first-time buyers face very low inventory, rising home prices and rents, and larger student loan debts. Many buyers are waiting until later in life to purchase their first home as well, with the median age in 2021 being 33 years. In contrast, the median age of first-time homebuyers was 29 years in 1981.
As far as home sellers go, the most commonly cited reasons for selling were to be closer to friends and family, upsize to a larger home, and to move into a more desirable neighborhood. This is no surprise, as the COVID-19 pandemic caused many homeowners to re-evaluate their current living situations, and prioritized locations near family, and more space for home offices and activities. Home sellers in 2021 were also able to get more equity from their homes upon sale, with the median being $85,000 more than they owe, up from $66,000 from a year ago. Homeownership is one of the greatest ways in which to build stable, generational wealth, as this was more than evident in 2021.
With the market being as brisk and complex as it is, home buyers and sellers overwhelmingly used a real estate agent to help them navigate the markets. 87% buyers used an agent, with the majority citing having an agent help them find the right home being the most common reason for doing so. Only 7% of all home sales were “For Sale By Owner,” a historical low since the survey began in 1981.
Shifting demographics were also seen in 2021. The percentage of buyers that identified as Caucasian dipped slightly from 83% to 82%, while the West continued to be more diverse, with 30% of home buyers identifying as a race other than White or Caucasian. Among all home buyers, most thought that environmentally features were at least somewhat important to their decision, with 80% citing heating and cooling costs as a consideration.
The vast majority of homebuyers used financing to purchase their home, with 87% securing a mortgage, however, this is down from 93% in 2003. In 2021, the median down payment was 13%, which was down from 20% in 1989. This actually has increased over the past two years, as more and more buyers are utilizing higher down payments to compete in a more competitive market, and also utilizing an increase in equity from the sale of their past home. If you would like any more information, just reach out to Best Flagstaff Homes Realty, and we will be glad to go even more in-depth!
GET TO KNOW BEST FLAGSTAFF HOMES REALTY
We think it’s fun to learn about each other with fun “About Us” questions so we wanted to continue to share them with you. This time around…..
FUN FACTS ABOUT OUR DOGS!
Sierra is a 5 year old Bernese Mountain Dog that loves her daily hikes but loves her treats more! She gets spoiled every morning when she goes to work with her dad. She immediately jumps out of the car and runs across the parking lot into the local Swift station. If the door is not already open, she waits patiently until a fellow patron opens the door for her and then she goes right to the owner’s office for her treats! She won’t go into the office until she says her morning hellos and gets her bacon strip!
Cleo is our old lady at 14 ½ years old. She still loves her walks and puts in 2-3 miles a day. Her other passions are eating treats and cuddling up for a good nap under a blanket or in our bed!
Tad’s Dog, Chunk, is a 10 month old Great Pyrenees. His interests include long walks on the beach, RomComs, and being fluffy. When he’s not acting like a puppy and eating things he’s not supposed to, Chunk attends night classes to become a Dental Hygienist. As time allows, Chunk also enjoys using his giant mass to pull his family’s Traeger Grill across their deck, eat the power cord, then throw it up in the middle of the night, after his owners have finally achieved R.E.M. sleep.
Bella & Rocco
Bella is an Albino Chiweenie rescue. Her red eyes come out at night along with her devilish demeanor but she is absolutely the most lovable girl. Old man Rocco weighs in at 6lbs, is always on guard and has a bit of a Napoleon complex. Both can be seen laying in the sun outside or curled up by the fireplace in the winter.
Lucy & Boscoe
Lucy, our 7 yr old Golden Retriever is special needs with no feeling in the left side of her face so her tongue always sticks out of the left side of her mouth and as you can see, she cannot clean herself up very well. Boscoe, our 9 yr old rescue, can learn a new trick daily in about 20 minutes. His lineup is quite entertaining.
Lucy & Boscoe
Jess’ Dog- Harper is a 10 month old Wired Hair Griffon. She is a great running buddy and loves to hide her toys in between the couch cushions.
Marian’s dog, Aggie, was adopted at the annual Pets in the Pines rescue event in 2018, after her husband, Joe, was quoted that morning as saying, “I am going to the Pets event today but we are definitely not adopting a dog.” Marian then received a frantic call while she was showing homes asking her to rush to Wheeler Park to meet the “perfect dog for us.” Aggie has since become a much loved member of the Armstrong family.