U.S. Real Estate Market 2022: Prices, Trends & Forecasts
The US Real Estate Market is constantly changing and evolving, as does the opportunities it brings. Whether you are a real estate professional, new or seasoned investor or a potential homeowner, the following US map and market analysis will help you better understand the current landscape. Click on a state below to get started!
The U.S. real estate market has experienced every end of the housing spectrum over the last decade. More than ten years ago, real estate market trends bottomed out during the Great Recession. For the better part of this year, competition fueled what looked like the hottest housing market prices the industry had ever seen. Buyers were forced to compete with several offers on every property, drastically tilting the scales in favor of sellers. Homeowners were given an advantage thanks to an imbalance in supply and demand.
It should be noted, however, that the looming threat of a recession and the highest inflation rate the US housing market has seen in about four decades has forced the Federal Reserve’s hand into taking drastic action. In order to combat inflation and slow the economy down, the Fed has introduced a number of rate hikes, not the least of which are responsible for more than double mortgage rates over the course of 2022.
Currently just south of seven percent, the average commitment rate on a 30-year fixed-rate mortgage is up 3.85 points year-over-year. The increase was intended to stall the blistering pace of the housing sector, and the plan worked. Mortgage applications have declined in the wake of higher rates and buyers who are less inclined to purchase a home with a recession appearing all but inevitable. At the same time, homeowners are reluctant to sell and trade their current mortgage rates for today’s inflated rates.
2022 has seen the US housing market transition from firing on all cylinders to slamming on the breaks. The Fed’s plan to slow activity in the housing market is working, which begs a few questions: What does the current state of the American housing market mean for today’s investors? What does the real estate investing landscape look like for investors across the country, now and for the foreseeable future? Will the U.S. housing market crash in 2022 or thrive?
The following provides an in-depth look at the current state of the U.S. real estate market and sheds some light on how investors may approach the rest of 2022.
For Sale Inventory: 1,058,054 (+4.0% year over year)
New Listings: 390,169 (+23.8% year over year)
Homes Sold: 314,221 (-29.5% year over year)
Median Days To Close: 35 (-3.0 year over year)
Median Rent (1 & 2 Room Units): $1,383 (+6.7% year over year)
Rental Vacancy Rate: 5.2%
Price-To-Rent Ratio: 21.56
Total Foreclsoure Starts In Q3: 92,634 (+104.0% year over year)
Unemployment Rate: 3.5% (latest estimate by the Bureau Of Labor Statistics)
Population: 331,893,745 (latest estimate by the U.S. Census Bureau)
Median Household Income: $64,994 (latest estimate by the U.S. Census Bureau)
Latest U.S. Housing Market News & Trends (11/01/2022)
The U.S. housing market is undergoing a significant shift. As the government attempts to quell inflation with higher interest rates, everything from housing market prices to foreclosure rates is in flux. Now that the Fed has officially announced it will continue to increase rates to combat inflation, let’s take a look at the latest housing market news and trends impacting the national real estate sector:
Home Prices: Housing market prices have visited every end of the spectrum in as little as a decade. Exactly ten years ago, U.S. home prices were starting to recover from The Great Recession. Since then, the median home value in the U.S. has increased upwards of 89.1% and continues to rise. To be clear, the fastest rate of appreciation has taken place during the pandemic. Over nearly three years, housing market prices have increased an average of 41.1%. Over the last 12 months, housing market prices have increased 14.9%. Moving forward, it is safe to say prices will continue to increase. At the very least, the same indicators that have driven prices up in recent history are still in play. Supply and demand constraints will push prices higher, but increasing interest rates will weigh on mortgage applications and lower demand. As a result, prices will climb higher, but at a slower pace than the market has grown accustomed to. One-year ppreciaiton may reach 1.4%, marking a significant slowdown over the previous 12 months.
Mortgage Rates: Following years of historically low interest rates, the average commitment rate on a 30-year fixed-rate mortgage is rising fast. Dropping to as low as 2.68% as recently as last December to spark activity in the housing market, 30-year mortgage rates have more than doubled in 2022. Now at 6.94%, rates have increased to combat inflation and lower demand. Despite radically higher rates, however, it is safe to assume that borrowing costs will continue to rise over 2022 and beyond. If for nothing else, a recent Consumer Price Index (CPI) Report identified the fastest rate of inflation the U.S. has seen in about 40 years. Inflation increased more than expected, which means additional increases in mortgage rates may be necessary to drive down the strength of the U.S. dollar.
Inventory Levels: Recent increases to mortgage rates and the looming threat of a recession have decreased mortgage applications. The latest numbers released by the Mortgage Bankers Association (MBA) suggest mortgage applications have declined for four consecutive months, dropping to the lowest level since 1997. Higher rates have essentially stalled the entire housing sector. “The speed and level to which rates have climbed this year have greatly reduced refinance activity and exacerbated existing affordability challenges in the purchase market. Residential housing activity ranging from housing starts to home sales have been on downward trends coinciding with the rise in rates. The current 30-year fixed rate is now well over three percentage points higher than a year ago, and both purchase and refinance applications were down 38 percent and 86 percent over the year, respectively,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist.
Rent Prices: The median rent for one- and two-bedroom units in the United States is about $1,383. Rents in the U.S. housing market are down about 0.2%, marking the first month-over-month decrease in 2022. Despite the decline, rental increases over the course of the year are higher than pre-pandemic levels. Assuming trends developed in the last two years hold true, rents may decrease over the next few months because winter tends to coincide with less activity.
Foreclosures Filings: The national foreclosure rate continues to revert back to pre-pandemic levels. While still down significantly over the last ten years, foreclosures are marching higher. The third quarter saw a total of 92,634 U.S. properties enter into the foreclosure process. At that rate, foreclosure filings are up 104.0% from the same time a year ago and up a much more modest 3.0% from the previous quarter. If foreclosures continue to increase at their current rate and the dollar continues to buy less, it is reasonable to assume that we may return to normal levels in the early part of next year.
The Top U.S. Real Estate Markets In 2022
The top U.S. real estate markets in 2022 are directly correlated to the new marketplace created in the wake of the Coronavirus. In particular, we are seeing a transition from larger, primary cities to smaller, secondary cities. Thanks, in large part, to new work-from-home trends, buyers are vacating the expensive confines of today's most expensive cities and trading living situations for more affordable alternatives.
The current landscape is shifting quickly, which begs the question: Where is the hottest real estate market in the United States? While answers may vary based on individual circumstances, the following markets can make a strong case for the best in the country:
Austin is exhibiting some of the strongest real estate market trends in the country. If for nothing else, the fourth largest city in Texas became the primary beneficiary of new market indicators created by the pandemic. In particular, work-from-home trends enabled more residents to trade the crowded confines of larger primary cities like Dallas, San Antonio and Houston for the Austin real estate market. In fact, positive net migration onset by one of the best up-and-coming tech hubs in America caused Austin’s median home value to appreciate at nearly twice the rate of the previously mentioned cities since the beginning of the pandemic.
When all is said and done, Austin’s attractive employment opportunities have attracted buyers from all over the country, and the local housing market has benefited immensely. If local real estate market trends continue on their current trajectory, Austin is well positioned to remain one of the top U.S. real estate markets in 2022 and beyond.
Median Home Price: $630,677
1-Year Appreciation Rate: +7.2%
1-Year Appreciation Forecast: +1.4%
Median Rent: $1,716
Raleigh appears to be another beneficiary of current real estate market trends. Most notably, the Raleigh real estate market became the location of choice when more people were granted the freedom to work from home. As residents of Charlotte looked for an alternative place to live, Raleigh quickly caught the attention of many home buyers. In fact, demand for real estate in Raleigh has been so high over the course of the pandemic that local appreciation rates have outpaced those in Charlotte.
Demand appears to stem from the multitude of opportunities presented to the millennial population. In addition to boasting an elite education system, Raleigh is also home to the Research Triangle. Otherwise referred to simply as The Triangle, the Research Triangle is a metropolitan area which consists of three major research universities: North Carolina State University, Duke University, and the University of North Carolina at Chapel Hill. The area serves as a catalyst for burgeoning millennial carries and a great place to buy a first-time home. The unique convergence of opportunity and small-town feel make Raleigh one of the hottest markets in the country for America’s largest home buyer population.
Median Home Price: $451,322
1-Year Appreciation Rate: +20.2%
1-Year Appreciation Forecast: +2.8%
Median Rent: $1,567
As it turns out, the Charlotte real estate market saw a large influx of net positive migration over the course of the last two years. More and more people decided to call Charlotte home because of its relatively low cost of living. In fact, the cost of living in Charlotte is about 5.0% less than the national average, which is one of the primary reasons many people chose to relocate there recently.
In addition to affordability, however, Charlotte boasts many promising real estate market trends. In particular, job opportunities are attracting America’s largest population of buyers: millennials. Home to Bank of America, Wells Fargo, Amazon, LendingTree and more, Charlotte is a great place for first-time homebuyers to settle down, and the local housing sector is reaping the rewards.
Median Home Price: $400,662
1-Year Appreciation Rate: +20.8%
1-Year Appreciation Forecast: +4.4%
Median Rent: $1,464
The popularity of the Phoenix real estate market is the direct result of its ability to attract buyers of every age. Already known as a retirement haven, Phoenix has attracted older generations in search of lower costs of living, dry heat, and an abundance of golf courses. Still, many may be surprised to hear that Phoenix's growing technology sector is beginning to attract younger generations from all over the country. Not unlike every other city that made the list, Phoenix is attracting anyone and everyone who is seeking affordability. As a result, builders have been working hard to bring supply back up to pace with demand.
Of course, the influx of buyers has increased home values year over year. Phoenix has seen many home values increase as much as six figures, easily making it one of the hottest cities in the U.S real estate market. That said, local real estate market trends are expected to continue to attract buyers of every age. Therein lies the reason real estate in Phoenix remains so attractive: the area has something for everyone at an affordable price.
Median Home Price: $413,234
1-Year Appreciation Rate: +11.9%
1-Year Appreciation Forecast: +1.7%
Median Rent: $1,637
Not unlike every other metro on this list, Nashville has become increasingly attractive over the course of the pandemic because of a very healthy job sector. For more than a couple of years now, in fact, the Nashville real estate market has benefited from some of the country’s fastest job and economic growth. Thanks–in large part–to the healthcare, tourism, music and manufacturing industries, Nashville has one of the strongest job markets in the country. Employment opportunities have paved the way for Nashville to create strong economic tailwinds.
Nashville’s latest real estate market trends have resulted in significant price increases. Last year, Nashville saw the fourth largest median-price increases in metro areas with a population of at least 1 million, trailing only Boston, Phoenix and Austin. Perhaps even more importantly, demand remained intact, which has made Nashville one of the hottest destinations in the U.S. real estate market.
Median Home Price: $458,485
1-Year Appreciation Rate: +25.4%
1-Year Appreciation Forecast: +2.1%
Median Rent: $1,511
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Median Home Prices 2022
The median home price in the U.S. real estate market has enjoyed historical appreciation rates for the better part of a decade. In the third quarter of 2012, housing market prices bottomed out at around $166,000. Since then, real estate market trends pushed the median home value in the United States up for ten consecutive years, to the tune of 89.1%. Today, the median home value in the U.S. real estate market is now $357,810.
While the median home value has been increasing for quite some time, the most significant gains have occurred over the last three years. New market indicators onset by the pandemic have created an environment conducive to rapid appreciation rates. Since the pandemic began, the average value of homes in the United States jumped 41.1%.
The first domino fell when the Fed decided to combat the fear and uncertainty onset by the pandemic with lower interest rates. Borrowing costs dropped to their lowest point ever during the pandemic, and buyers noticed. Fueled by government stimuli, pent-up demand, and the lowest interest rates anyone had ever seen, buyers came out in droves. Nonetheless, demand quickly turned into competition, and inventory levels couldn't keep pace with the influx of buyers. In a matter of weeks, sellers were receiving multiple offers on their homes and forced to increase housing market prices accordingly.
In 2022 interest rates are expected to rise, fueling more demand before borrowing costs increase too much. Demand has turned into competition, and indicators in each of the country's four major regions reflected the increase in activity:
Midwest: Active listings increased 4.8% from the previous year, median listing prices increased 11.8% year over year, and listings lasted on the market 5 days longer than this time last year
Northeast: Active listings dropped 6.0% from the previous year, median listing prices increased 8.2% year over year, and listings lasted on the market 5 days longer than this time last year
South: Active listings increased 57.5% from the previous year, median listing prices increased 11.8% year over year, and listings lasted on the market 6 days longer than this time last year
West: Active listings increased 64.2% from the previous year, median listing prices increased 7.3% year over year, and listings lasted on the market 10 days longer than this time last year
The cost of homeownership has risen dramatically in a short period, which begs the question: Will housing market prices go down anytime soon? The answer is most likely "yes." While today's market leans heavily in favor of sellers, the tides are shifting. Mortgage applications are dropping and the Fed's attempt to quell competition in the US housing market is working. Homes prices will continue to appreciate as long as supply remains low, but activity is decreasing and taking power away from sellers. While it is too soon to tell when prices will reign back in, it is only a matter of time.
Median Rent Prices In 2022
The median rent price in the United States for one- and two-bedroom units is somewhere in the neighborhood of $1,383. Rents have tested new highs each month in 2022, but September was the exception. Rntal rate represents a month-over-month decrrease for the first time all year. In the event US real estate trends continue from previous years during the pandemic, it is safe to assume rents will decline slightly over the winter months.
At the start of the pandemic, rental prices fell as more people quarantined and followed government-mandated "shelter-in-place" orders. Rental prices bottomed out towards the end of 2020 but have increased almost every month since. It is important to note that the median rent in the United States hasn't only grown for more than two years but that the rate of growth is the fastest on record. To understand why rental rates have increased at such a rapid rate, it's essential to understand the correlation they share with home prices.
Housing market prices have increased for more than 10 consecutive years (every year since they bottomed out during the Great Recession). However, the pandemic set several events in motion that accelerated appreciation rates over the last year. In particular, quarantine orders prevented national home builders from obtaining building permits and adding to the nation's already insufficient inventory levels. At the same time, homeowners pulled listings from the market due to the fear and uncertainty onset by COVID-19. As a result, the U.S. housing market doesn't have enough inventory on the books and real estate market trends are posing as headwinds for renters.
In conjunction with pent-up demand, government stimuli, and historically low interest rates, the lack of supply created a seller's market, the likes of which we have never seen before. Simply put, there aren't nearly enough homes to satiate demand, and homeowners have increased asking prices based on the level of competition their listings have been receiving.
Therein lies the single greatest catalyst for today's rising rental prices: The unique combination of high home prices and insufficient inventory levels has relegated many would-be buyers to the rental pool (even those who can afford to buy have been forced to remain renters throughout 2022). Demand for rentals has increased dramatically, and landlords have increased rents all across the U.S. housing market.
Despite broad increases on a national level, data points suggest a significant regional variation. While affordable, mid-size markets tend to see more growth in rental rates, expensive primary cities have seen the most significant pandemic-related declines because of secular work-from-home trends.
As more people were granted the freedom to work from home, larger, more expensive cities experienced a mass exodus. Without the need to live within close proximity to work, more and more people packed up and moved to more affordable cities. In doing so, however, many of the most affordable cities in the country saw their rents increase significantly. Since the start of the pandemic, unique real estate market trends have increased rents the most in the following cities:
U.S. Housing Market Foreclosure Trends & Statistics
According to Attom Data Solutions' Q3 2022 U.S. Foreclosure Market Report, there were a total of 92,634 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — in the fthird quarter of 2022. That figure is up 104.0% from the same time period a year ago and up just 3.0% from the last quarter.
It is worth noting, however, that the latest year-over-year increase in foreclosures is unique. Foreclosures were artificially suppressed by government-mandated moratoriums and subsequent bills (the CARES Act), which were designed to help homeowners struggling with the financial ramifications of COVID-19. The latest real estate market trends suggest foreclosures in the U.S. housing market are returning to normal.
“Foreclosure starts, while rising since the end of the government’s foreclosure moratorium, still lag behind pre-pandemic levels,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Foreclosure activity is reflecting other aspects of the economy, as unemployment rates continue to be historically low, and mortgage delinquency rates are lower than they were before the COVID-19 outbreak.”
States with the highest distribution of foreclosures in the third quarter of 2022:
Metro areas with the highest distribution of foreclosures in the first half of 2022:
Peoria, Illinois: One in every 472
Cleveland, Ohio: One in every 589
Jacksonville, North Carolina: One in every 593
Columbia, South Carolina: One in every 599
Rockford, Illinois: One in every 602
Lenders started the foreclosure process on 67,249 properties in the third quarter of this year, up 1.0% from the previous quarter and 167.0% from the same period last year. The states with the most foreclosure starts in the third quarter of 2022 are:
The current state of the U.S. real estate market is directly correlated to the impact of the Coronavirus on the housing sector and the Fed's response to mitigate a disaster. That said, the U.S. housing market is in a much different place than it was nearly three years ago. At the onset of the pandemic, the housing sector was looking more and more likely to break records and usher in a spring selling season unlike any that had come before it.
Instead of realizing one of the most lucrative springs in recent history, however, the U.S. housing market suffered a significant setback. Fear and uncertainty surrounding COVID-19 prevented buyers from touring homes, sellers pulled their listings off the market, and mortgage underwriters closed their doors because of government-mandated "shelter-in-place" orders.
To stimulate the real estate market and prevent a total collapse, the Fed dropped interest rates to their lowest levels ever. The move catalyzed buyers, and pent-up demand encouraged prospective owners to participate in the market. It should be noted, however, that demand quickly turned into competition. The unique convergence of low interest rates increased savings from quarantine, and government stimuli created a feeding frenzy the market wasn't ready for.
In a matter of weeks, demand greatly outweighed supply. Owners were receiving multiple offers and eventually increased their prices accordingly. Over the last year alone, the median home value in the United States increased 16.5%; that's in addition to the decade of increases that preceded the previous 12 months. Simply put, the pandemic created an environment that favored sellers and sent home prices on an upward trajectory that has yet to ease.
The resulting high-price environment forced real estate investors across the country to reevaluate their exit strategies in 2022. Homes are simply too expensive, and profit margins are growing too slim to not at least consider an alternative to the wildly popular rehab exit strategy.
Due to higher acquisition costs, few foreclosures (due to moratoriums), lower profit margins, and even lower borrowing costs, today's investors are increasingly turning to building rental property portfolios. Access to affordable institutional money has enabled today's investors to simultaneously offset higher prices and increase monthly cash flow from properties placed in operation. With interest rates well below three percent, it's entirely likely for investors to pay down mortgages with other people's money and still pocket some profits each month, even in today's high-priced environment.
That is not to say rehabs and flips aren't viable in many markets across the country, but rather that the new U.S. housing market created in the wake of the pandemic is much more conducive to long-term rentals (and should continue to be for the foreseeable future).
U.S. Housing Market 2022 Projections
Forecasting the U.S. real estate market without an inherent degree of error is a fool's errand. No crystal ball can predict U.S. real estate market trends. However, it is entirely possible to read into existing trends and extrapolate data to make an educated guess. That said, it is pretty safe to assume the following U.S. housing market forecast 2022 will come to fruition:
Housing Market Prices Will Continue To Rise: There isn't a single U.S. real estate market forecast that isn't calling for an increase in home prices in 2022. The median home value in the United States has risen for ten consecutive years. Today's median home value is approximately $357,810. Over the last 12 months alone, housing market prices have risen 14.9% due to increasing demand and a lack of supply. However, the latest drop in activity due to higher mortgage rates is expected to temper appreciation. While homes are expected to increase about 1.4% becuse of low inventory levels, less activity will take some power away from sellers. The lack of competition could lead to price drops in some areas, but that will be the exception; not the rule.
Inventory Shortages Will Ease Slightly: The U.S. housing market currently has 1,058,054 homes for sale, which is well below "healthy" levels. While builders are back to work, inventory will continue to be hard to come by. If for nothing else, homeowners don’t want to sell because they would rather not trade their current mortgage for today’s going rate. As a result, fewer homes are going up for sale. On the other hand, the US housing market has seen years of historic appreciation. There will most likely be some homeowners testing the waters and adding to inventory levels.
Millennials Will Buy The Most Homes: Millennials have represented the largest share of home buyers for the better part of a decade, and the trend will continue into 2022 and beyond. Today, millennial buyers (ages 22 to 40) make up the majority of all home purchases. Moving forward, as "younger" millennials grow into their careers, it's safe to assume the share of buyers will lean even more heavily in favor of millennials. As a result, expect starter homes to represent a large portion of home sales moving forward.
Interest Rates Will Increase: Interest rates are up year to date. With the average commitment rate on a 30-year fixed-rate mortgage resting somewhere in the neighborhood of 6.94%, borrowing costs have more than doubled in 2022. Additionally, Federal Reserve Chairman Jerome Powell reiterated that rates will increase until inflation is staved off. For the time being, inflation sis till running high, which means the US housing market must “take one for the team.” Rates will continue to increase until activity is slowed to a point the Fed deems acceptable.
Secondary Cities Will Receive More Attention: Today's median home value tests new highs each month as appreciation continues to run rampant. Nowhere else are prices more exorbitant than in primary cities like San Francisco and New York. That said, the latest work-from-home movement onset by the pandemic has enabled more people to leave large, expensive metro areas. The exodus out of larger cities will most likely result in an influx of buyers in local secondary cities. If for nothing else, secondary cities allow buyers to take on a lower cost of living while simultaneously avoiding large crowds.
Investors Will Prioritize Rental Properties: While attractive profit margins remain across the country, they are growing harder and harder to find in select cities. As a result, a growing number of investors are expected to trade rehabs and flips for building out rental property portfolios. In addition to shrinking profit margins, historically low interest rates have made it cheaper than ever to borrow institutional money. Lower borrowing costs will simultaneously help investors offset high acquisition costs and increase monthly cash flow from properties placed in operation.
Of the housing market projections 2022 is most likely to realize, none may seem more evident than continued appreciation. However, it is important to note that these projects are just that; a forecast based on deductive reasoning. There is no guarantee any of these trends will come to fruition, but it is essential for investors to at least note the direction the market is heading. Doing so will enable forward-thinking entrepreneurs to be more proactive than reactive, making the difference between a good investor and a great investor.
The US housing market was firing on all cylinders as recently as the beginning of this year. However, inflation brought about by the Coronavirus and years of government stimuli needs to be dealt with. In an attempt to reign in the highest inflation rate the US housing market has seen in about four decades, the Federal reserve has increased interest rates at an alarming rate. More than doubling over the course of 2022, higher mortgage rates are slowing the housing sector. That said, sellers are finally losing the stranglehold they have had over the US real estate market for a decade. While price increases are expected to continue, the rate in which homes increase in value is expected to slow. As the Fed clamps down on inflation, opportunistic buyers who have been patiently waiting to buy may finally have an opportunity.
*The information presented is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing provided shall constitute financial, tax, legal, or accounting advice or individually tailored investment advice. This information is for educational purposes only.