Low Supply, Millennials and Vacation Markets Are Defining the Housing Market in the U.S. and Beyond
High demand and a lack of supply were hallmarks of the year, especially with mortgage rates at or near historic lows, according to The Agency’s annual Red Paper, released Friday. Buyers continued to be drawn to larger homes with outdoor space, pools and other recreational amenities, and many returned to cities to be closer to their jobs or because they missed the action of urban hubs.
In addition, vacation markets and resort-style residences in locations such as Hawaii and Mexico saw ramped-up interest, as buyers looked to invest in a retreat that can also be a revenue stream.
Millennials accounted for more than half of all home loan applications, according to the report, while affluent individuals snapped up bigger, more remote properties.
“Ultra-luxury markets saw the greatest movement among local buyers, while international investors began to return by year’s end,” the report said.
Covid-19 also brought tech to the forefront, a trend that is here to stay.
“The pandemic-induced market conditions of the last two years have swelled innovation, bringing consumer-facing technology to the forefront of the industry,” Rainy Hake Austin, president of The Agency, said in a statement, adding that that includes non-fungible tokens (NFTs), cryptocurrency, proptech, and data platforms that aid in the ease transactions.
Design-wise, buyers priorities shifted from the open floor plan to more traditional layouts with “individualized spaces for work, study, fitness and entertainment,” the report said.
The Agency also checked in with 48 markets where it has offices, from California to the Caribbean.
Buyers across the Golden State migrated to bigger properties in less dense areas, some of them leaving the state altogether, according the report. Some San Francisco residents, for example, moved to areas such as the North and East Bays, as well as Napa and Sonoma counties. Still, the city saw robust sales, with single-family home and condo transactions up 33% and 40%, respectively, compared to 2020, when the pandemic all but shutdown trading in March and April.
In Los Angeles, sales of single-family homes were up 32% year over year, with the median price rising 24%, the data showed. Condo sales more than doubled compared to 2020. There were 20 sales of residences priced at $50 million or more in the city.
Many Californians, now able to work from anywhere, fled to states with lower costs of living. Las Vegas was a big beneficiary in the reshuffle, in part because of Nevada’s low taxes. More than 80% of Las Vegas buyers in 2021 were California-based, and homes in the seven-figure range have been receiving multiple offers.
“Overall, the number of single-family home sales and the median price both rose 19% year over year, while the condo market saw a substantial 127% rise in sales transactions,” according to the report.
South Florida, which also has no income tax, has also seen an influx of buyers from California, as well as the Northeast and Midwest.
The Caribbean has also emerged as a hotspot for real estate.
Take Turks & Caicos, where sales of single-family homes surged 167% annually last year and the median price rose 51%, the data showed. Many of the residences are now owner occupied for much of the year, and rented out for the remaining months.
Inflation and rising interest rates are expected to slow the market this year. Price growth is likely to fall to the single-digit range and demand will continue to outstrip supply as new construction lags because of supply chain and rising material costs.
Still, “there is no bubble to burst and a strong market is expected in 2022,” the report said.