2022 Housing Prediction Report

If you're stressed out about a potential housing crash, you are not alone.

Google searches for "will the housing market crash" are up over 1,000% since January 2020.

Experts agree that the housing market is in for a cool-off. But the good news is that this decline won't be anything close to as bad as the crash in 2008.

What else can you expect from the South Carolina real estate market in 2022 and beyond? We're bringing you this guide to answer that question and more.

Keep reading for everything you need to know about experts' housing market predictions.

Housing Market Prediction

So, will real estate crash in 2022 or 2023? Most likely not. Luckily, the safeguards implemented after the 2008 recession have prevented the market from becoming overleveraged today.

For example, the 2008 recession resulted, in part, from a slackening of underwriting standards on home loans known as adjustable-rate mortgages (ARMs).

In 2007, 36% of all mortgages were ARMs. Today, these home loans only represent 8% of all active mortgages. For this reason and more, it's highly unlikely that we'll experience a significant real estate crash.

So, the better question is: will the current housing market boom continue for the next few years? The answer to this question is also probably no.

As we'll discuss later, inventory is on track to recover to pre-COVID levels. This increase in supply should help lessen the record-breaking price increases you've seen across the country.

South Carolina Housing Market

Now that we've outlined the state of the overall housing market, let's narrow in on South Carolina. Specifically, we'll compare South Carolina to the US in terms of home prices, incomes, and mortgage delinquencies.

South Carolina is currently an extremely hot market for real estate. This fact is due to the state's relatively low cost of living, healthy job market, and beauty.

The US as a whole saw a home price increase of nearly 21% year over year. Compare that to the state of South Carolina, which saw home sale increases of a whopping 24.56%. Here's how home prices break down by region:

  • Charleston: 21.55% year over year increase
  • Columbia: 19.05% year over year increase
  • Greenville: 19.81% year over year increase

South Carolina home sale prices are slightly higher than the national average. But when you narrow in on individual markets, the price hikes don't look so bad compared to the US as a whole.

However, incomes are also up compared to home prices. In the US as a whole, personal incomes are up 1.61% year over year. South Carolina, on the other hand, has seen income increases of nearly twice as much at 2.45%.

Finally, South Carolina mortgage delinquencies (2.09% in Q1 '22) are slightly higher than the national average (1.86% in Q1 '22). However, ARM delinquencies are slightly lower than the national average of 2.34% at 2.04% in Q1 '22.

The relatively low rate of ARMs is one reason why the current market has such high prices and reduced inventory. We'll talk about these factors and more next. 

Current Housing Market

The following three factors characterize the current South Carolina housing market:

  • Low inventory
  • High demand (especially in the suburbs)
  • Appreciating home values

In South Carolina, permits for new homes are down 7.79% from last month. That is only slightly higher than the national average of 7.34%. When you look at new home permits market by market, though, the numbers look a bit better.

For example, in the Columbia area, new housing permits increased 61.86% from May to June. Charleston and Sumter also saw double-digit gains of 25.75% and 33.33%, respectively.

Low foreclosure rates have further exacerbated supply issues. Currently, the foreclosure rate in South Carolina is only 0.9%.

Rising interest rates have recently impacted demand. Home sales were down 4.8% in April compared to earlier this year. Yet, that's very modest compared to the 16.6% decline in national real estate sales during the same period.

These stats show that, though demand has declined from its record-highs after the pandemic, it's still high. Individual markets have seen even smaller home sales decreases, with Columbia coming in at a negative 4.3%.

Finally, home values will continue to appreciate in 2022. The median home sale price in 2022 is $204,820. This price is up 20.96% year over year in Charleston, but it's actually a 0.85% decrease from the last three months of 2021.

Columbia and Greenville have also seen recent slow-downs in home sale prices. The median home sale price in Columbia declined 20.51% since June 2021 but only 2.17% from the last three months of 2021. In Greenville, the median home price dropped 25.96% in a year but only 3.14% from Q4 '21.

Housing Market Prediction

We don't have a crystal ball to help us predict exactly what will happen in the South Carolina real estate market going forward. But the above statistics do hint at what's to come.

First of all, interest rate hikes will have a negative impact on demand. Homebuyers who can't afford to pay the higher interest rates will be sidelined. Unfortunately, first-time homebuyers are part of the group that rising mortgage rates will impact the most.

At the same time, incomes are on the rise, and unemployment is declining nationally and in South Carolina. Also, the majority of millennials (the largest generation) are now adults and of homebuying age. Both of these factors could push demand right back up.

We've already mentioned that home values are appreciating in South Carolina. However, home price growth has already begun to slow. Reports show that national home prices are up over 70%, signaling that the real estate market is overvalued.

As demand continues to slow and supply increases, you can expect to see lower home sale prices compared to the last 12 months. But they won't be as low as pre-COVID prices.

Why? Because in 2021, over 8% of US residents moved to a new home, 20% of which moved to a home in a completely different state. South Carolina was the tenth most-popular state that these migrants moved to.

This positive migration rate has led to changes in income demographics in South Carolina. And this fact will force the real estate market value up. According to real estate analyst CoreLogic, you can expect a 5.6% increase in home prices by April 2023.

South Carolina Housing Market Trends

If you've been paying attention to our report, you've probably noticed some market trends so far. Inventory in some markets will recover, first-time homebuyers will continue to struggle, and more people will choose to rent.

Inventory Recovery

Home inventory hit an all-time low in 2021. But we can expect an increasing number of homes to hit the market in the coming months.

Rising interest rates will deter investors from buying properties en masse. Plus, the increase in home permits means we can expect new construction houses to hit the market in the next year.

People who wanted to sell their homes but were sidelined due to an inability to find a new home will also contribute to the rising supply. Former homeowners who did sell their homes and had to rent until more properties came on the market could reduce this effect.

The bad news is that inventory recovery won't happen everywhere. Supply issues will likely still persist in high-demand areas like suburban markets as homebuyers look for more space to accommodate their remote work lifestyle.

First-Time Homebuyers Will Struggle

70% of all US homes sold for above listing price at the beginning of 2022. This fact has made it difficult for first-time buyers to find an affordable home.

Further exacerbating the issue, mortgage rates and home sale prices are at the highest they've been in two years. Both of these factors will affect the affordability of entry-level homes.

When it comes to demand, there is good news. Investors have all but left local markets because of the rising cost of borrowing cash. Their departure will free up lower-level homes with the opportunity to put in sweat equity for first-time buyers.

However, don't expect a less-competitive market. Homes will likely go for much lower over asking than they have over the past few years. But there will still be buyers like yourself who have been sidelined and all enter the market at once.

Increasing Rental Rates

Home supply is limited. Many first-time and veteran buyers alike are struggling to afford a new home. And these factors have led to an increase in renting, which has further resulted in an extremely low rental vacancy rate.

If you know anything about rentals, communities with lower vacancy rates can charge more per unit. This is why you may have recently seen a significant spike in the price to rent.

Why should rental prices matter to you as a potential homebuyer? Because if rental prices keep increasing as they're projected to, some renters may take a chance on buying. And if too many renters try to purchase homes, it could further drive up real estate prices.

How Homebuyers and Home Sellers Can Prepare for the Future Housing Market

2022 and 2023 are looking good for both homebuyers and homeowners who are ready to list. Homebuyers will enjoy more options, while homeowners can get a lot of value for their homes.

However, these groups will also face challenges. For homebuyers, the market will be just as competitive as it has been over the last few years. And with rising interest rates, monthly payments will be higher than they would have been a few years ago.

Homeowners will face the challenge of finding a new home. If you're searching for a new home after selling your current one, you'll face the same challenges as other prospective homebuyers.

How Homebuyers Can Prepare for the Housing Market

There isn't much you can do about home prices. The majority of homes are going for above asking and receive multiple offers. So, trying to lowball isn't a good strategy in this market.

Since you can't control the price, focus on what you can control when buying a home. First, you can double- and triple-check your budget to determine what type of home you can afford. This will prevent you from wasting time on homes that are outside your budget.

Another suggestion is to act fast. Homes have been and will continue to sell rapidly. If you really want a home, you may not have time to dwell on your decision because someone else will scoop it up from under you.

How Home Sellers Can Prepare for the Housing Market

Homeowners are in a somewhat better place than prospective homebuyers. Home values are at a record high, and if your home is in good condition and priced right, you'll have no problem making a sale.

At the same time, your ability to sell your home will hinge on finding a new home to move into. This is why owners looking to sell secondary homes or vacation properties have an advantage over regular sellers.

Investors looking to sell investment properties are also in a good position going forward. You should have no problem making a good ROI. But considering the projected rental gains in the near future, you may actually consider marketing your home as a rental property instead.

Let JW Martin Help You Buy or Sell Your Home

The housing market likely won't crash anytime soon. But you can expect to see somewhat slower appreciation, increased inventory, and more competition in 2022 and 2023. We hope these tips will help you prepare for what's to come with South Carolina real estate.

Are you looking to buy or sell your home in South Carolina? Call JW Martin Homes today to find out how our expert agents can help you buy or sell your home in Clemson.


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Buying a New Construction Home Vs. Existing Used Home