Housing Markets to Watch in 2022
By Carole Vansickle Ellis
As 2021 drew to a close, real estate investors began looking forward to the 2022 real estate market with the now-all-to-familiar word in the back of their minds: “unprecedented.”
When COVID-19 first breached U.S. shores in early 2020, many investors feared another housing crash. Instead, many facets of the market boomed. As the pandemic dragged on into 2021, many commercial investors feared the “end of office space” or a massive market softening when foreclosure forbearance programs and eviction moratoriums ended. Instead, all indications are, so far, that while there may be a slight deceleration from the wild price increases of 2021 in 2022, there is unlikely to be a true crash or, in many markets, even much of a slowdown.
For real estate investors, this type of national housing heat represents a tricky situation since acquiring properties at the top of the market can be risky and the unpredictable sway of public health policy can, at a moment’s notice, change everything.
With the complicated, arguably overpriced, and yes, “unprecedented” nature of today’s residential and commercial real estate sectors in mind, REI-INK has selected five housing markets (and a bonus sidebar) to watch in 2022. These markets have been selected based not only on their current price trajectory but, equally important in today’s market, their recession- and pandemic-resistance.
Furthermore, we placed high value on a market’s potential inventory and how that inventory might affect pricing specifically in 2022 as well as identifying interesting areas that may not have been squarely in the spotlight in 2020 or 2021.
Here are REI-INK’s Housing Markets to Watch in 2022:
Tampa-St. Petersburg, Florida
The Tampa-St. Petersburg area often flies under the radar because it is generally considered a “secondary” market rather than a primary market like larger southeastern metros. However, this market has plenty to recommend it in 2022, including relative affordability, a solid projected population growth of about 1.3 percent paired with employment and household growth of 1.6 percent and 1.7 percent, respectively, and an excellent urban and suburban planning record. As more American workers elect to take positions with employers who permit remote work much or all of the time and, as a result, begin looking for temperate climates in which in live, Florida as a whole is emerging as an extremely hot market. Tampa-St. Petersburg residents live between 45 minutes and about two hours from the beach, enjoy year-round outdoor recreation, and can have their pick of existing homes or new construction.
PricewaterhouseCooper has named Tampa one of seven “Super Sun Belt” magnet cities for 2022, indicating that PwC analysts expect Tampa to continue to be a “migration destination for both people and companies” and grow more quickly than the U.S. average in terms of both population and jobs. Magnet cities also tend to have demographics that are “skewed toward faster economic growth prospects with higher proportions of Millennials and Gen-Xers and relatively fewer seniors and retirees… [as well as being] preferred markets for investors and builders,” PwC researchers wrote. Investor demand in Tampa-St. Petersburg going into 2022 is relatively strong for rental properties, fix-and-flip deals, and development opportunities. Thanks to a powerful business culture boasting recession-resistant institutions like Tech Data (~14,700 employees), medical manufacturing services provider Jabil (~39,100 employees), and JPMorgan Chase (~302,000 employees), among many others, Tampa’s local economy is in prime position to attract all-important Millennial homebuyers in 2022 as well as many tech and financial service providers. A prime location on the Florida High Tech Corridor also benefits the local market’s 2022 potential.
2nd
Top Homebuilding Prospects in 2022
PwC
5th
Top Overall Real Estate Prospects in 2022
PwC
9.6%
projected year-over-year sales growth
Realtor.com
6.8%
projected year-over-year price growth
Realtor.com
3rd
Top Florida Markets for Construction Activity (Summer 2021)
Yardi Matrix
Raleigh-Durham, North Carolina
Whether you specialize in new-home construction or prefer renovating existing properties, Raleigh-Durham promises to be a strong market with some remaining potential for growth in 2022. Not only has the Urban Land Institute (ULI) ranked this area sixth on its “Hottest Housing Markets for 2022” report, but ULI analysts explained that the ranking was due, in large part, to a ripple effect from the growing appeal around Charlotte, North Carolina. Analysts describe the market as having “a big city feel for a small-or moderate-city dollar,” and add that the area has long been a major player in the finance industry. PwC also ranked Raleigh-Durham second for “overall real estate prospects” and first for “homebuilding prospects” in 2022.
Raleigh-Durham is considered a “Supernova Magnet City” for 2022 according to the PwC/ULI “Emerging Trends” report, meaning it is one of the fastest-growing metro areas in the country. All three new “Supernova” cities – Austin, Texas, and Nashville, Tennessee are the others – are noteworthy due to their popularity with both developers and investors. With defining attributes like “tremendous and sustained population and job growth well above national averages,” Raleigh-Durham and other supernova cities are especially attractive to young Millennials, many of whom may wish to become first-time buyers in the near future or may find themselves compelled to rent in order to live in the type of residence and location they prefer as they enter middle adulthood.
2nd
Top Real Estate Markets for 2022
PwC
1st
Top Markets for Building New Homes
PwC
6th
Homebuilding Opportunity
National Association of Realtors (NAR)
4th
Emerging Housing Market Index (Raleigh)
Wall Street Journal/Realtor.com
4th
Top 10 Housing Markets for Millennials in 2021
NAR
Atlanta, Georgia
With one of the highest numbers of foreclosure starts in October 2021, Atlanta represents a great deal of potential for real estate investors, especially since the city is one of the most affordable 24-hour cities in the country. Ranked 8th on PwC’s “Top 10 Real Estate Markets for 2022” and 9th by the same company for “people looking to build new homes,” investors are likely to find relatively more opportunities to acquire assets in Atlanta and the surrounding area than in areas closer to cities of comparable size. Also, unlike many comparable metro areas, Atlanta has plenty of room for new construction in its suburbs, although prices in the neighborhoods surrounding the city have skyrocketed in recent years.
Due in large part to COVID-related changes in work policies that permit full-time or near-full-time remote work, Atlanta has seen an influx of new residents since the start of 2020. A local loan officer explained, “Our taxes are low, the weather is generally nice, and the cost of living is good.” NAR also made particular note of Atlanta at the end of 2021, ranking it first on its “Top 10 Markets During & In a Post-COVID-19 Environment” for resilience during the pandemic period and expectations that the market will continue to perform in a post-pandemic environment.
“What stands out about the Atlanta metro area is that it has the highest share of workers working from home [and]… among the top ten metros [on the list], it attracted the third-largest number of movers,” NAR analysts wrote. They added, “This metro area has also been recovering well, with mobility to retail and recreation plac[ing] at just 7 percent below the January 2020 level.” Nationally, this metric is still 20 percent down from the months immediately prior to the start of the COVID-19 outbreak.
8th
Top Markets for Overall Real Estate Prospects
PwC
9th
Top Markets for Homebuilding Prospects
PwC
Top 10
Top 10 Markets During and In a Post-COVID-19 Environment
NAR
5th
Cities (> 1 million population) with greatest number of foreclosure starts in October 2021
ATTOM Data
Nashville, Tennessee
Thanks to out-of-state purchasers, relative affordability compared to most of the country, and plenty of smaller communities ready to carve out their share of Tennessee’s economic growth and recovery in 2022, Nashville and the surrounding area is certainly a real estate market to watch in 2022. With a five-year projected annual population growth estimate of 1.3 percent, a five-year projected employment growth of 1.2 percent, and a five-year projected household growth of 1.7 percent, the metro area appears well equipped to handle the influx of new residents drawn to the area by its low crime rates, low taxes, and generally low cost-of-living. Thanks to development- and investor-friendly policies in the market, Realtor.com analysts expect the city’s inventory to loosen up slightly in 2022 to allow for a 5.5 percent increase in home sales volumes and a 5.6 percent increase in home prices. Nashville, like Raleigh-Durham, is also considered to be a “supernova magnet market” for 2022 by the Urban Land Institute and PwC.
The smaller markets surrounding Nashville are also poised for new opportunities in 2022, and real estate investors may benefit from looking slightly farther afield when seeking opportunities to acquire assets either to fix-and-flip or renovate and rent out. Local professionals make note of a statewide effort to expand internet access and broadband as indicators of markets ready to “emerge” on the scene; there is currently a $500 million initiative in process intended to bring broadband to communities currently still dealing with slow internet. While Nashville itself, of course, has broadband access, communities nearby may soon experience a rise in property values and new economic growth as this project reaches fruition over the course of the year. Nashville is also currently one of the top cities in the country for Millennials, many of whom are beginning to seriously consider making their first home purchase.
3rd
Best Cities for Millennials for 2021
Homebuyer.com
1st
Top Ranked Real Estate Markets for 2022
PwC
1st
Investor Demand for 2022
PwC/ULI
2nd
Development/Redevelopment Opportunities for 2022
PwC/ULI
4th
Best Real Estate Markets in the U.S. for 2021
WalletHub
Fort Myers/Cape Coral
It is hard to select just a few markets to watch because nearly every market in the country represents opportunity in some form or fashion at this time. We placed the Fort Myers/Cape Coral market on this list because while many markets seem to be nearing the top of their climb, this market appears to have room for more growth and is currently a little more “open” when it comes to investor demand. The market certainly has not been left behind by the boom that has pervaded the Florida real estate market; median sales prices for single-family homes have risen by double digits according to Florida Realtors. GoBankingRates labeled southwest Florida, as a whole, one of the biggest “boomtowns” in the country.
With industry sectors like cleantech, emerging technologies, life sciences, and defense and homeland security making their homes in southwest Florida, the Fort Myers/Cape Coral area likely has a little more time left on its expansion than many other markets. In fact, Realtor.com predicted that housing inventory levels could fall in this area in 2022 rather than rise, as they are predicted to do in most other areas of the country. Investors who act early in the year to acquire valuable assets could enjoy a prime position toward the latter half of 2022 and into 2023. Cape Coral and its surrounding southwestern Florida market is considered a “niche market” by the Urban Land Institute and PwC, meaning that the analysts consider the area relatively less economically diverse than magnet markets but with “a dominant economic driver that supports stable economic growth.” The PwC/ULI Emerging Trends in Real Estate 2022 report ranked Cape Coral/Fort Myers in the top 50 markets for overall real estate prospects and homebuilding prospects, noting that investor demand and development/redevelopment opportunities in this area are strong but not extremely strong, indicating potential for further growth in 2022.
3rd
Best Places for Jobs in the U.S. — 2021
Forbes
3rd
Best Housing Markets for First-Time Homebuyers — 2021
WalletHub
1st
Biggest tax refunds in the country
Fox Business
2nd
Best Places to Retire in Florida (Fort Myers)
WalletHub
1st
Fastest Growing Cities in America (Fort Myers)
WalletHub
Sidebar
Keeping an Eye on Elgin
The Elgin-Naperville-Chicago market spans three states: Illinois, Indiana, and Wisconsin. This market makes the list because it is so far behind other metro areas of similar sizes, posting the fourth-slowest home-building recovery of the 10 biggest metropolitan areas in the United States and reporting slower builds of new homes per capita than most MSAs of similar sizes. This area was still officially recovering from the Great Recession in terms of new-home building when COVID-19 hit; now, the area is ripe for investors to move in and turn things around. Investors should be wary due to rapidly changing public health policies and high property taxes, but, unlike other markets on this list, Elgin and the surrounding areas have more opportunities for “traditional” buy-low/sell-high real estate investing strategies than many of the more heated markets around the country.
