GREENVILLE, S.C. -- What should residential real estate investors expect to happen in 2022? Lima One Capital has some answers.
The Greenville-based real estate investment lender released its inaugural Market Outlook For Real Estate Investors. This 30-page report is the culmination of the company’s unique and diverse real estate insights based on its expert knowledge of markets across the country.
The report can be found here or by clicking https://limaone.com/2022-outlook.
Highlights from the report include:
Home Price Growth: Several market publications are projecting very healthy home price growth in 2022 with an average 7.5% increase. However, there is a big spread in those numbers with a low of 1.9 % increase predicted by CoreLogic to 16% by Goldman Sachs.
Non-Traditional Borrowers: According to the US Bureau of Labor Statistics, more than 9.6 million people are registered as self-employed in the country, while a report by the International Labor Organization said that the share of gig workers in the country was expected to rise to 43% by 2020, showing that non-traditional borrowers are becoming an increasingly important sector in the country’s economy.
Inflation: Inflation is often tied to real estate prices. The last 20 years - before the pandemic – averaged 2.15% inflation. In 2021, the inflation rate skyrocketed to well over 6%, but 2022 looks to return to a more normal rate. The average rate looks to be about 2.8% with Goldman Sachs, Kiplinger’s and the Federal Reserve all within decimal points of that number.
Unemployment: Expect to see the unemployment rate at around 3.8%. A lower unemployment rate generally leads to a busy housing market, with investors acquiring properties with much more frequency than average. As unemployment rates decrease, expect a surge of mom-and-pop investors.
U.S. Economic Growth: Two percent economic growth is considered a normal, healthy market. The growth percentage is projected to double year- over-year, which means the real estate investment market will anticipate a surge.
Rental Outlook and Growth: There are 741,361 multifamily units are under construction nationwide with a 725,000 net absorption. We expect 7-10% rent growth with 30 percent of local markets to experience double digit rent increases. Nationally, the consensus is the vacancy rate is expected to remain fairly consistent with 2021's historically low 6.2%. Vacancy rates for 2022 are expected to land between 6%-7%. Many markets will be considerably lower than the average (<4%).
Single Family: Even after a skyrocketing 2021, the single-family housing market is projected to increase across both starts and sales. New home starts are expected to increase 5.3% from 1,129,000 to 1,189,000, while new build homes sales could increase 13.9% from 791,000 to 901,000. In addition, existing home sales should increase incrementally from 5,798,000 to 5,853,000.
Interest Rate Predictions: Although conventional interest rates are predicted to increase year-over-year, they may continue to run lower than the historical average, and aren’t fully conducive to the non-conforming and short-term markets. Look for the rate to be 3.8%.
About Lima One Capital
Since its inception in 2011, Lima One Capital has funded over $4 billion in loans for real estate investors who are building, improving, and stabilizing neighborhoods across the nation. Lima One’s core loan products are New Construction loans for ground-up construction, in-fill, specs, and model homes; Fix and Flip, a 13-month bridge loan for investors who are buying, renovating, and selling properties; Rental property and portfolio loans for purchasing or refinancing residential rental properties; and Multifamily lending for the purchase, rehab, refinance, or hold of 5+ unit multifamily properties. For more information, visit limaone.com.
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