As we enter summertime and Q3 2022, folks are wondering what the housing market predictions will be like considering the recent turn of events.
Table of Contents
- Typical Summer Trends for the Real Estate Sector
- 3 Summer Housing Market Predictions 2022
- 2022 Housing Market Predictions for the Top Real Estate Markets
- Wrapping It Up
Mortgage rates for June are expected to hover around the 5.0% mark. This is a welcome break from the upward movement we’ve been getting for the past few months. However, how big of an impact will the steady rate have on the summer housing market 2022?
Typical Summer Trends for the Real Estate Sector
Seasons have a greater impact on the real estate sector than you think. They influence the price you will pay or ask for. In certain cases, the difference could be as much as 10% depending on your location.
Each season carries with it certain trends—characteristics if you will—that folks can generally expect. The different seasons have a direct effect on supply and demand. For example, competition is especially tight during spring and summer. These two seasons are generally considered the best seasons for the real estate industry as far as sales go.
Seasonality also affects the movement of people. For instance, folks with kids tend to not want to move right smack in the middle of a school year. This is why the percentage of people moving during summertime is a lot higher than, say, wintertime. The high demand for housing during the summer makes it a bit tougher to find great deals. On the other hand, wintertime is a great season to spot awesome deals because there is less demand.
Seasons also have different effects on the ordinary home buyer and a real estate investor. Typically, regular folks selling a house are also in the market to buy one. This means that they don’t have the luxury of selling when everybody is buying and vice versa. This is because they will need a house to stay in during that particular gap.
Real estate investors on the other hand can afford to buy investment properties regardless of the season because they’re in for portfolio expansion. The only way seasonality will affect them is with supply and demand as these two will dictate property prices.
That being said, summertime possesses certain characteristics that both home buyers and real estate investors can anticipate each year.
Summertime Piggybacks Off Springtime’s Momentum
Riding off the springtime’s momentum, summer usually is a busy season for the real estate sector. Since school is out, a lot of folks who have been planning to move houses do it during this time. There’s a lot more buying and selling that takes place in the summer as it isn’t such a busy season. People tend to buy more aggressively from July to September.
Competition Is Fierce
One of the most common housing market predictions for the summertime is that competition is tight. Since there’s more movement in the house market, the competition is almost always fierce during summertime. With folks being more aggressive in buying properties, the inventory for summer is typically limited and expensive.
Summer Is the Season When Most Folks Are Likely to Move
Most summer housing market predictions mention this season as the best time for families to uproot and move. As mentioned earlier, families with school kids prefer to move during the summer season instead of in the middle of the school year. That’s why parents wait until summer to uproot their families and move houses. And despite the holiday break, winter isn’t a good time for this activity. It’s a very busy season and moving houses will only add more stress to an already stressful season.
Related: Late Summer Through Early Fall Is the Best Time to Buy a Vacation Rental Property
3 Summer Housing Market Predictions 2022
Now that we already have an idea of what to expect during summer, is it safe to assume that things will be the same this year?
According to experts’ housing market predictions for next 5 years, we can expect a general upward movement for both property prices and mortgage rates. Questions of when will housing prices drop or how high will mortgage rates go in 2022 have all been addressed in forecasts. However, forecasts are just that: forecasts. They are not exactly 100% guaranteed to happen. Although most housing market predictions are based on historical performance and trends, no one can ever say that a prediction has a hundred percent chance of happening.
One example is how interest rates have already hit the 5.0% mark in Q2 2022. Housing market predictions for 2022 made last year all said that we will reach that number by the end of the year. But given the economic slowdown and global supply chain issues caused by geopolitical conflicts, we are where we are now.
The ongoing war in Eastern Europe and the rate of inflation have contributed to mortgage rates hitting year-end predictions this early. However, June mortgage rates have also steadied because of certain factors. Given the recent turn of events, what does summer 2022 have in store for the real estate industry?
The Summer Housing Market Is Unlikely to Cool Off
While housing market predictions for this summer will vary based on who’s giving them, most experts agree that the market will remain hot this season.
CoreLogic’s deputy chief economist Selma Hepp says that the market will stay hot due to strong buyer demand and an elevated rate of price growth. The buyer demand may be prompted by seasonality but then again, many buyers are probably spurred by continually increasing rates.
Greg McBride, the chief financial analyst for Bankrate, thinks otherwise and says that demand for housing will drop over the next few months because of increasing housing prices and mortgage rates. However, just because the market is cooling doesn’t necessarily mean that prices will go down. In fact, according to McBride, home prices will continue to go up to levels of 15% to 20% of what homes sold last year.
Nadia Evangelou, senior economist and director of forecasting for the National Association of Realtors, says that home sales have dropped this past quarter. However, she is also quick to point out that because of seasonality trends, the market will continue to outperform its pre-pandemic numbers. She reminds us that June is traditionally the busiest month in real estate.
As buyer demand stays strong, experts think that home prices will remain high this summer.
Rental Rates Continue to Increase but at a Slower Rate Than Last Year
Just like property prices, rental rates have significantly gone up over the past year. In fact, rent prices have recently hit record highs across the country. Q1 2022 ended with a 13.6% year-over-year growth rate. Single-family home rental rates more than tripled in March 2022 compared to the same period last year.
It was only in April 2022 that the climb slowed down a bit, but that is no indication that rates are going to stay still or drop. Experts anticipate the rental rates will continue to go up albeit at a slower rate than in 2021.
Zumper’s senior economic analyst Jeff Andrews says that May’s slightly cooler rental rate increases are indications of a less frantic rental property market.
We Are Not in a Housing Bubble
Concerns over a US housing market crash have been circulating over the past year. The real estate industry, amid a pandemic, has been performing exceptionally well. It has recovered from the pandemic’s disruption at a stellar rate. Now, questions of when will the housing market crash and other housing market crash predictions are a point of concern for investors.
So is the housing market going to crash? Not likely. Not anytime soon. According to industry experts, we’re not even in a housing bubble at this point. Housing bubbles are typically created when there is great demand for housing, a surplus in inventory, and easy access to homes with loose credit.
There may have been a significant increase in the demand for housing but acquiring them isn’t as easy as during the 2008 market crash. Lenders and banks have put in place stricter regulations for borrowers, a lesson painfully learned.
There’s also the matter of supply. Although there has been an increase in inventory, it will still take years for it to catch up to the demand. And even if it does, younger investors wanting to take advantage of appreciation rates are restricted by stringent lending regulations.
Those who want to take advantage of this season should perform due diligence and know what the local market conditions are. It’s not just enough to know what experts are talking about and predicting. An investor needs more factual information than that.
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2022 Housing Market Predictions for the Top Real Estate Markets
According to Rocket Homes and the US Census Bureau, the following housing markets are expected to be red hot this summer.
We sorted this list according to housing affordability based on their latest median prices using Mashvisor’s data. We have included both traditional and vacation rental data so investors have a better idea of which rental strategy is viable for the said states. They can use the accompanying data to come up with an initial analysis to see if the return on investment is worth spending money on.
North Carolina
- Median Property Price: $540,852
- Average Price per Square Foot: $287
- Days on Market: 93
- Monthly Traditional Rental Income: $1,593
- Traditional Cash on Cash Return: 1.91%
- Traditional Cap Rate: 1.96%
- Price to Rent Ratio: 28 (high)
- Monthly Airbnb Rental Income: $2,896
- Airbnb Cash on Cash Return: 3.44%
- Airbnb Cap Rate: 3.53%
- Airbnb Daily Rate: $160
- Airbnb Occupancy Rate: 54%
- Walk Score: 45
Among all the states on this list, North Carolina has the most affordable median property price and lowest per square foot rate. It also has decent traditional cash on cash return and cap rate and pretty good rates for Airbnb properties.
Georgia
- Median Property Price: $555,607
- Average Price per Square Foot: $425
- Days on Market: 59
- Monthly Traditional Rental Income: $1,866
- Traditional Cash on Cash Return: 2.15%
- Traditional Cap Rate: 2.21%
- Price to Rent Ratio: 25 (high)
- Monthly Airbnb Rental Income: $2,690
- Airbnb Cash on Cash Return: 2.59%
- Airbnb Cap Rate: 2.65%
- Airbnb Daily Rate: $175
- Airbnb Occupancy Rate: 45%
- Walk Score: 46
Georgia is a great place where investors can go with either a long-term or short-term rental property investment. It has above-2.00% cash on cash return and cap rates for both types of rentals plus a fairly high price to rent ratio. Additionally, properties are still within reach at the current median property value.
Texas
- Median Property Price: $588,510
- Average Price per Square Foot: $302
- Days on Market: 72
- Monthly Traditional Rental Income: $1,966
- Traditional Cash on Cash Return: 1.77%
- Traditional Cap Rate: 1.82%
- Price to Rent Ratio: 25 (high)
- Monthly Airbnb Rental Income: $3,257
- Airbnb Cash on Cash Return: 3.02%
- Airbnb Cap Rate: 3.10%
- Airbnb Daily Rate: $194
- Airbnb Occupancy Rate: 50%
- Walk Score: 46
The Texas real estate market has been a consistent top performer. Dallas and Austin are two of the best places for real estate investments, especially short-term rentals. Of course, it will depend on the actual location, but generally, Texas is still a great place for real estate investing this summer.
Florida
- Median Property Price: $686,642
- Average Price per Square Foot: $430
- Days on Market: 72
- Monthly Traditional Rental Income: $2,452
- Traditional Cash on Cash Return: 2.37%
- Traditional Cap Rate: 2.43%
- Price to Rent Ratio: 23 (high)
- Monthly Airbnb Rental Income: $3,247
- Airbnb Cash on Cash Return: 2.77%
- Airbnb Cap Rate: 2.84%
- Airbnb Daily Rate: $222
- Airbnb Occupancy Rate: 53%
- Walk Score: 49
Florida remains one of the country’s hottest real estate markets. It has consistently been a top performer for years and it looks like things aren’t gonna change anytime soon. The pleasant year-round weather, great attractions, and overall lifestyle make it a great place for in-migrants and visitors. Housing market predictions 2022 Florida make thousands of investors optimistic about investing in FL regardless of the season.
Related: The Best Place to Buy Condo in Florida: Investor’s Guide
Arizona
- Median Property Price: $754,536
- Average Price per Square Foot: $402
- Days on Market: 84
- Monthly Traditional Rental Income: $2,087
- Traditional Cash on Cash Return: 1.97%
- Traditional Cap Rate: 2.00%
- Price to Rent Ratio: 30 (high)
- Monthly Airbnb Rental Income: $4,125
- Airbnb Cash on Cash Return: 3.82%
- Airbnb Cap Rate: 3.88%
- Airbnb Daily Rate: $229
- Airbnb Occupancy Rate: 59%
- Walk Score: 43
Arizona has very good cash on cash return and cap rates for Airbnb properties. Its traditional numbers aren’t bad either considering its high price to rent ratio. Investors looking for both long-term and short-term rental properties might find it worth their while.
Colorado
- Median Property Price: $973,123
- Average Price per Square Foot: $589
- Days on Market: 120
- Monthly Traditional Rental Income: $2,130
- Traditional Cash on Cash Return: 1.53%
- Traditional Cap Rate: 1.56%
- Price to Rent Ratio: 38 (high)
- Monthly Airbnb Rental Income: $3,271
- Airbnb Cash on Cash Return: 2.10%
- Airbnb Cap Rate: 2.14%
- Airbnb Daily Rate: $241
- Airbnb Occupancy Rate: 49%
- Walk Score: 47
Among all the states on this list, Colorado has the highest price to rent ratio. A high ratio with a score of 20 and up means that a property is very expensive. This makes renting a more practical option for those in search of homes. That being said, CO is a great place for investing in traditional rental properties.
California
- Median Property Price: $1,162,820
- Average Price per Square Foot: $837
- Days on Market: 53
- Monthly Traditional Rental Income: $3,472
- Traditional Cash on Cash Return: 1.74%
- Traditional Cap Rate: 1.76%
- Price to Rent Ratio: 28 (high)
- Monthly Airbnb Rental Income: $5,258
- Airbnb Cash on Cash Return: 3.02%
- Airbnb Cap Rate: 3.06%
- Airbnb Daily Rate: $275
- Airbnb Occupancy Rate: 60%
- Walk Score: 50
The numbers above all line up with existing California housing market predictions 2022, that it will remain one of the hottest markets this year. It may be home to some of the most expensive properties on the West Coast, but its cash on cash return and cap rate make it worth considering.
Related: The Best Rental Markets in California: The Complete 2022 Guide
Wrapping It Up
Seasonality’s effects are felt throughout the industry. Housing market predictions aside, investors like you should always take into consideration the current market conditions. A smart investor knows how important a role the right data plays in a successful investment. You cannot just pin all hopes on predictions because the circumstances surrounding us can be fairly unpredictable.
To get the most accurate housing market data, you can turn to a website like Mashvisor. Mashvisor specializes in real estate data analytics that helps thousands of investors make the right decisions. It has a massive database that covers almost all housing markets in the US. Its investing tools have led investors to the most profitable properties that align with their goals.
While real estate forecasts give you something to anticipate, real-time market data gives you something tangible to work with.
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