Home price appreciation will moderate to 8 – 10% in 2022 and return to a more normal 4 to 5% as we head into 2023, predicts MarketNsight Founder and Chief Analyst John Hunt. The housing analysis firm recently held its biannual MarketWatch Atlanta event where Hunt gave a market update and his predictions for 2022.
“It is going to take us a decade to get out of this housing shortage – and Goldman Sachs agrees with me,” Hunt said. “Taking land from entitlement to fruition as a new home community takes a long time.”
The metro Atlanta area needs 90,000 more homes over the next year to meet housing demand and get back to a normal six-month supply of inventory. According to Hunt, Demand for housing is extremely high with basically zero months of inventory at present.
“Decades of under-building and under developing, combined with development timelines, exclusionary zoning issues and a myriad of other factors, means it will take years to start to meet the current demand,” Hunt said. “We may put 20,000 lots on the ground in metro Atlanta in 2022, but we will continue to be in a deficit for a while and that’s not a bad problem for the industry.”
According to Hunt’s latest data, new home permits are up 20% over 2020, and he predicts they will continue to moderate and end up at 15% up over 2020.
“For 2022 it is not a question of demand, it’s our ability as an industry to produce lots,” Hunt said. “Because of this, permits will moderate to 8% in 2022. The homebuilding industry cannot meet the demand for entry-level homes priced in the $300,000s in Atlanta, so how do we solve this?”
MarketNsight offers two solutions: move farther out and drive until you qualify or build smaller homes closer in.
“Demand is going to continue to drive us as an industry to build farther out and build higher-density products,” Hunt said. “The suburban shift wasn’t caused by the pandemic, it started when we ran out of cheap lots.”
In 2013, 75% of all new home sales were in the six core Atlanta counties. Now only 50% of new home sales happen in these counties as buyers and builders continue to push farther out due to affordability.
MarketNsight predicts second-tier cities will continue to benefit from homebuyers moving farther out from inner cities. Combine this with the ability to work from home and places like Augusta, Savannah, Chattanooga, Greenville and Huntsville are going to continue to grow. These cities offer more affordable homes because the cost of development is less.
Density is not dead because of the pandemic. Townhome closings have escalated from 2013 to 2021. Both first-time buyers and move-down buyers purchase townhomes due to affordability and because they provide the lifestyle buyers want. Most of these buyers are double income with no kids and disposable income looking to live in a specific area of town. Location is the amenity for them.
While other national forecasters and economists predict the market is going to collapse because it is overbuilt, MarketNsight predicts 2022 will be another good year for the new homebuilding industry. With zero inventory, the market is not back to normal, and it continues to be hot!
MarketNsight is focused on helping its customers make smart decisions as it relates to purchasing land and pricing product. Its groundbreaking Feasibility Matrix provides a one-stop shop for gauging new home community feasibility by providing ranking reports, lot and raw land sales data, regression analysis and mortgage data.
To learn more or to schedule a demonstration, visit www.MarketNsight.com.
