Market Expert Sees Higher Real Estate Prices and Rates in 2022

With the Federal Reserve set to raise interest rates in 2022, that might tamp down demand for real estate, but one market expert doesn’t see that happening.

Since the start of the pandemic, real estate prices have been skyrocketing as more homeowners use their living space as live-work hybrids amid social distancing measures. That won’t relent anytime soon, according to chief economist Danielle Hale.

“We expect a whirlwind 2022 for the housing market. Home sales are expected to increase another 6.6% and home prices to rise another 2.9% on top of 2021 highs,” Hale says in a Forbes article. “A gradual uptick in mortgage rates will make affordability a top consideration for home buyers, especially the 45 million Millennials aged 26 to 35 who are at prime first-time home buyer age. Demand from these young households will keep the market competitive and fast-paced despite a small uptick in housing inventory as builders continue to ramp up production, increasing single-family starts by 5% in 2022.”

“Although affordability challenges will come from rising prices and mortgage rates, rising rents, which are projected to increase 7.1% will be a strong motivator for many hopeful first-time buyers,” Hale adds further. “On top of this, all home shoppers will have some advantages that stem from a competitive jobs market. Incomes are projected to increase by 3.3% and with many employers looking to attract and retain talent without impacting costs, we expect workplace flexibility will continue. This should free-up potential home buyers to broaden their search parameters to include the suburbs and in some cases even completely new, less pricey metro areas.”

A Global Real Estate Opportunity

As real estate prices continue to rise, owning property may be out of the reach for some investors. However, they can still get real estate exposure on a global scale with the FlexShares Global Quality Real Estate Index Fund (GQRE).

Per the fund description, GQRE seeks investment results that generally correspond to the price and yield performance of the Northern Trust Global Quality Real Estate Index. The index is designed to reflect the performance of a selection of companies that, in aggregate, possess greater exposure to quality, value, and momentum factors relative to the Northern Trust Global Real Estate Index.

Price appreciation continues to be the norm for real estate, and market experts don’t expect it to stop with the new year around the corner. If the U.S. real estate market serves as the bellwether, then global markets should follow the same trend.

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