Industry Trends: Housing
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Industry Trends: Housing
As we look at the latest trends in housing and temporary living, we find that many companies are planning for continued improvements in their relocation programs and are optimistic for the new year. Here are some of the key findings in 2022:
- Home buying trends. A low supply and high demand, combined with record low interest rates, caused a home buying frenzy that drove prices up and inventory down nationwide. The real estate market started to turn significantly in August 2022 and has continued to cool since then. Some buyers were forced to cancel contracts due to the rate hikes, and in other cases, transferees could not find a buyer, so they accepted a relocation buyout.
- Real estate and recession. Researchers report that the real estate market is unlikely to crash as it did in 2008, due to the housing inventory being much lower and lending guidelines being much tighter than they were previously. The 2008 recession started in the housing market and radiated out to rest of economy. Today, it’s reversed, with the signs of recession in the economy beginning to affect the housing market.
- Mass purchasing of homes. Venture capital firms were mass buying homes and even entire neighborhoods. Many investors were either keeping the homes as rental properties, which helped increase rental costs in many areas.
- International housing effects. Housing costs continued to rise in many countries throughout 2022. For example, Singapore was one of the first Asian countries to re-open post-pandemic, and as a result, the country has seen a skyrocketing of housing prices.
- Mortgage payment increase. In past year, the average mortgage payment has increased 53% from $1,265 to $1,944, resulting in added stress for homeowners to qualify for a loan.
- Increases in temporary living costs. Research shows that temporary housing costs are increasing as they are primarily driven by short supply and high demand, coupled with rising energy costs. The energy costs also impact rates for houseware deliveries, cleaning staff costs, and utilities.
- Alternative temporary living accommodations. More corporations are asking about “alternative” providers, such as Airbnb and VRBO as temporary housing solutions. However, these options often pose challenges with privacy, fire and safety concerns, 24/7 maintenance assistance, and scheduling disruptions. To combat these issues, the alternative companies are working to address the concerns and may prove to be more viable options in the future.
- New platforms are less personal. Bidding platforms, favored by Relocation Management Companies, are making the temporary housing booking process more transactional. While this may be perceived as less personal, the platforms offer quicker response time, cost competitiveness, and a wider range of temporary housing options.
- Work-from-home has changed the industry. The remote-working trend is driving people towards homes and temporary housing units with more rooms, and less open floorplans, to accommodate work-from-home situations. This trend also has people flocking to the suburbs as city living is no longer a necessity for certain careers.
Looking Ahead to 2023
As we enter 2023, the Federal Reserve has made it clear that they will continue to raise rates until the economy slows down and inflation drops significantly. Once it is clear that inflation is retreating, the Fed should start to lower rates again, but rates aren’t expected to decline until 2024.
At NuCompass, we expect to see real estate properties start to turn over in the Spring and Summer markets. There is still buyer demand, but the interest rate hikes have caused buyers to qualify for much less than they did a year ago. Prices have dropped significantly since their peak in 2022, so buyers will have to decide if they want to take advantage of lower home prices or wait on lower mortgage rates. It will be an interesting year for buyers and sellers with all eyes on inflation and the Federal Reserve.
While it's impossible to fully predict future markets, reviewing current data and trends can help identify statistical patterns or commonalities that can be useful in developing corporate strategies and business plans for the coming year.