What’s contributing to homebuyer urgency in 2022? Three experts share their thoughts

by Emily Mack

Spring is always a strong season for the real estate market, but the buildup might seem less pronounced this year, since Chicagoland sales remained hot throughout the winter. Between persistent demand and rising home prices, it’s been an especially competitive environment for prospective buyers — with the likelihood of increased interest rates only adding to the urgency. But how long can we expect these trends to continue?

Chicago Agent sat down with three industry experts to discuss the state of the frenzied market and to ask what we can anticipate in the coming months: Quentin Green, an agent with Downtown Realty Company; Jimmy Janevski, designated managing broker for Baird & Warner’s LaGrange office; and Ayoub Rabah, president of Coldwell Banker Realty in the central west region. And though they represent different areas around Chicagoland, all three professionals highlighted similar market trends.

The most prominent among them? A wave of first-time, millennial homebuyers. As Green pointed out, the peak demographic for first-time homebuyers now hovers around the age of 31 and “It’s a huge driving factor … because they’re coming from places where they are paying high rent.” Just as home prices have appreciated, rents are skyrocketing: a fact which can make potential sellers reluctant to list, Green added.

“They’re probably better off buying than taking it on the chin with rent appreciation,” Janevski agreed. And as more millennials are driven to purchasing, there’s a sudden cultural push among peers, he said. “Pre-pandemic, half of the millennials out there didn’t own a home,” Janevski said, “But a lot of it right now is keeping up with the Joneses … ‘Oh, my friend got a home,’ [so maybe I should] … that’s also playing into why there’s an increase in demand.”

However, Rabah warned about the lack of affordability for these first-time homebuyers. “If you’re a first-time homebuyer, you’re probably talking about this amongst yourselves,” he said, “But I don’t see many headlines about it. What you thought you could afford, you’re now unable to afford … And there are a lot of bidding wars out there.” Additionally, he pointed out that it’s millennials, looking at entry-level homes, who are likely most impacted by rising interest rates.

Like in any current discussion about the state of the market, the looming likelihood of higher interest rates was a dominant theme in our conversation. “As you can see, interest rates have gone up in the past three weeks,” Rabah said. “While they’re still extremely low historically … it causes people to think ‘I’m going to miss out!’”

Green echoed the sentiment, commenting that the rising rates have not deterred prospective homebuyers. “Ninety percent of the people I talk to think rates are going to rise. But rates are already rising,” noting that recent increases have not reduced buyer demand. And at this point, it seems, the trend is set to continue, he added. “The acceleration of how much they’ve come up in a short period of time is an indication that we’re not done seeing [them rise].

Janevski, though, was quick to point out that some of this worry is misplaced. “Interest rates are absolutely heading up,” he said, “But people misinterpret the Fed rates as affecting the mortgage rates directly when they don’t.” Instead, he emphasized that buyers look at the 10-year Treasury yield when making decisions, which effectively stands as a proxy for mortgage rates.

But of course, rising interest rates are not the only factor spiking demand in 2022. Ongoing factors brought about by the pandemic continue to boost and complicate this unusual market. Rabah broke it down: “If you start looking at the byproducts of the pandemic — inflation and workforce mobility — what are those two things doing to housing?” While inflation drives up home prices, workforce mobility increases demand and price appreciation because people can work from anywhere, he added.

Similarly, Janevski noted that lifestyle changes have increased demand. Referencing recent NAR studies, he said that for the first time in a decade, there was a significant decrease in the average time homeowners are staying in their home. “It went down from 10 years to eight,” according to Janevski. “Some of it plays into how people work today, even compared to a couple of years ago. People are considering whether they want to live in a more populous area or move out for more green space.” Since many of today’s jobs require less — if any — time spent at the office, homeowners are willing to commute further distances.

Commenting on the same tendency, Rabah added, “Younger generations who said, ‘I’ll never move to the suburbs,’ are looking there. They want a backyard, an office and a place for the dog to run.” He also highlighted the suburbs as an increasingly hot area. “I oversee four states and every single one of our [suburban] markets has constrained supply,” Rabah said, adding, “The only market with higher supply rates is for high-rises in the Loop.”

Green, too, made note of that vertical market phenomenon. “When you get into the neighborhoods, it’s low supply. It’s super low-inventory and it’s a dog fight out there,” he said. But inflation has not scared off buyers, he said. Reenforcing the value of real estate in this volatile time, Green summed it up: “There’s no other financial tool you can use to leverage money like real estate, so people are trying to do it as much as possible. I see it from both a residential and an investor standpoint. They’re wanting to hedge themselves against inflation more immediately.”

Read More Related to This Post

Join the conversation

New Subscribe

  • This field is for validation purposes and should be left unchanged.