By Pat Riley, President/CEO, Allen Tate Companies
As we move into the New Year, it’s a good time to look back on the real estate market activity and intensity of 2021 and see what we will carry forward into 2022. I’ve been in the business 48 years, and during the past five years, we’ve witnessed more market change than in all of the previous years combined.
Our year-end numbers are still being finalized, but Allen Tate is well on track for the best year in the history of the company, with more than $6.69 billion in closed sales volume. That’s a substantial increase over 2020, when we set a record with $6.15 billion.
We expect to close more than 19,000 out of our 48 offices in the Carolinas’ transactions for 2021, and we listed nearly 9,600 homes for sale — pretty similar to 2020.
Whew. What an amazing year.
So where do we go from here? Let’s look at a few residential marketplace fundamentals.
Interest rates. Interest rates are starting to move upward. Why? To slow down inflation. The days of super low rates under 3 and 4% are probably behind us. Time will tell how fast rates will increase and what impact they will have on the economy. More than 70% of mortgages in the U.S. currently have interest rates under 4%.
Appreciation rates on existing homes. We ended 2021 with unprecedented appreciation rates of more than 13% in the markets Allen Tate serves. Is this sustainable? No. I expect to see rates recede this year, down to 8% to 9% appreciation, but that will still leave us way up from the historic benchmark of 3% to 4% annually.
If you want to buy a home now, will you be paying too much? No. Even with significant appreciation, homes in the Carolinas remain a bargain compared to most of the country, thanks to average sale prices and reasonable tax rates.
Investment buyers. Investors, both Wall Street and local, continue to buy properties to rent or flip. With the stock market high, appreciation rates high and mortgage rates still very low, this is an understandable way to diversify an investment portfolio.
Inventory. New construction in 2022 will still be challenged by broken supply chains, labor issues and land shortages. If you want to build, you need patience and a Realtor by your side as your advocate through the process. You pay the same amount and you need that representation.
Buyers will still compete for existing homes. Baby boomers are still holding tight to their homes and not improving them to today’s desired standards. It’s getting harder for Boomers to move to lifestyle communities, because of health requirements, availability and price. Boomers need to get their home in shape to sell now, so they can make the move to right-size when the time comes. By 2025, it is predicted that 38% of all homes will be multi-generational.
First-time home buyers. Renters should get out of their lease as soon as possible — and stop paying someone else’s mortgage. Ask parents or grandparents for help with a down payment. Wealth transfer may be more beneficial sooner rather than later, tax-wise. Interest rates are moving upward, so the time to buy that first home is now.
The year 2021 was another one of navigating through a changing marketplace, and 2022 will keep us on that path. We don’t expect to flip the calendar and see big differences. The residential real estate market has always ebbed and flowed.
But we know that the Carolinas will continue to remain front and center for both corporate and family relocations. And the human touch of a Realtor, to coach you through the sale or purchase of your home, is your best resource to navigating successfully.
This content first appeared in the GSA Business Report Book of Experts.