What are the drivers of housing demand in 2022?

NAR data shows that first-time buyers have overcome rising home prices to patch together a downpayment, through diversifying their downpayment source, using savings, downpayment help from family and friends and stock market/401k loans to assist in their path to ownership. Younger millennials may have also helped as they moved back home during the pandemic at record numbers, thus skipped paying market value rent to a landlord. The highest share of young adults since the Great Depression moved home, and will now be re-emptying the nest as they purchase homes. Additionally, 38% of student debt borrowers were able to use the pandemic to pay down their student debt by paying more to their principle of their debt or cutting spending on entertainment. 

Movement for more space

As of week 33 in the U.S. Census Pulse Survey, 23.5% of households had at least one family member who worked remotely due to the coronavirus. As the omicron variant spreads, if workplaces are able, many are maintaining fully remote or hybrid plans. This flexibility is likely to continue and become permanent as recruiting and retaining talent becomes increasingly difficult for CEOs. Workforce flexibility allowed consumers more freedom in their choice of location for home buying. In the latest Realtors Confidence Survey, 88% of buyers purchased in a suburban, small town or rural area. This is up from 85% one year ago. 

Buyers are moving to suburban areas not only for the square footage but for the affordability and inventory that are more likely to be found in these regions. Even before the pandemic, it was more likely for a young millennial buyer to purchase in a small town rather than an urban center. Housing affordability, space and inventory become top priorities in decision making when buying a home, in addition to proximity of family. Regardless of this movement, there will always be the attraction of city centers for some buyers who want the walkability and amenities. These buyers may be reinventing the suburbs with walkable town centers and gathering places for their children and pets. 

Familial dynamics

In the last year, a desire to be closer to friends and family ranked as the top reason for repeat buyers to purchase a home and for sellers to sell a home. The needs of buyers of all ages have evolved not only in what they need from their home — a home office, a bigger yard, and more room to cook — but also who lives near their home. Support systems are now a top priority for neighborhood choice, edging out both convenience to job and affordability of homes. The reason to remain close to family may differ for different homebuyers. For working parents, elderly relatives may be the extra set of hands needed as schools continue to grapple with hybrid, remote and in-person schedules. The growing share of single women homebuyers may desire family and friends to be close, but not within her own home. Young adult buyers may seek the comfort of families nearby after moving from family homes, and retirees may pursue the benefit of being close to grandchildren. 

Known unknowns

The next year is not without unknowns. Where will the pandemic go next? What is the next variant after omicron, and what impact will it have? Despite these unknowns,  purchasing a home continues to be an  investment buyers want to make for their financial future. Even with the expected increase in interest rates, homebuyers can lock in a historically low rate and know with certainty what their monthly cost will be for the next 30 years. The American Dream of homeownership is a constant, providing both financial and housing stability within a sea of societal uncertainty.