For buyers and sellers alike, the 2021 real estate market across Southeast Pennsylvania looked largely unfamiliar. Uncertainty about the future weighed heavily on individuals and industries across the country in 2020, and Main Line real estate prices looked as though they might suffer. However, after gaining its footing in the latter half of 2020, 2021 produced something altogether different. Sales picked up and home values skyrocketed.
People were on the move, and aggressive buyers would not be deterred—fueled by historically low interest rates. Bidding wars over homes in desirable neighborhoods across the entire Main Line region were the rule—not the exception. Affluent buyers, in particular, took a cautious approach to Main Line transactions as the year wore on. Those wanting to avoid overpaying in a bidding war held off. With the upheaval of 2021 behind, the question now turns to 2022 and what the year will bring.
Main Line real estate remains a good investment
Overall, the Main Line real estate market remains a solid investment. Savvy buyers who have remained patient through the turbulence of the past 12 months could see superb homes, more stable pricing, and less competition. This will prove especially true should they target homes in high-value areas that require a bit more TLC.
Mortgage rates are on the move
Seeking to stave off inflation and spur a measured recovery from the COVID-19 pandemic, the Federal Reserve announced its intentions to increase rates in 2022. Increases will be measured and most predictions posit that rates will finish the year between 3.75% and 4%, meeting the threshold of pre-pandemic numbers. Buyers may have slightly less purchasing power upon this increase, but there will be less competition for homes. Even with a slight increase, higher rates remove some of the more aggressive elements of the real estate market. Less bidding translates to more amenable negotiations. While the seller may lose out on some of their premium, within neighborhoods as desirable as the Main Line, they still stand to make a profit from the sale over the life of their investment.
Home prices lower
That said, a low plateau won't be reached for a very long time due to two significant factors: Main Line homes won't lose their desirability, and inventory might take even longer to recover.
Inventory remains tight
A couple of factors are working against Main Line housing inventory. For new builds, heightened land and construction costs make development less lucrative. Factor in material shortages, which slow down build times considerably, and you've got a thin inventory of homes coming online at any given time. Coupled with a segment of sellers still hesitant to list for fear of finding another desirable Main Line home for sale, it's easy to see why values will remain high for the coming year.
Demand remains high
Millennials make up the largest segment of home buyers today and carry the most buying power. However, no longer tied to the office, many buyers from all generations are seeking out homes outside urban hubs. This is a trend that will continue over the next five to seven years.
The second group of buyers is institutional investors. While their presence isn't felt at the luxury level as much as at lower price points, all markets are beginning to see mass purchases materialize. This plays into the popularity of rentals, both short and long-term. Expect this trend to stick around for a while.
Buying advice for those entering the market
If that process is untenable, consider how flexible you can be with your home search. If you can expand your search area and look for hidden gems—undervalued or underappreciated homes and neighborhoods—do so. You'll face less competition and potentially negotiate with motivated sellers. If you’re willing to get your hands dirty or invest in upgrades and renovations, many excellent Main Line luxury properties would benefit from a thoughtful owner. More often than not, you can acquire vintage homes at a discount, and use the savings to make your own upgrades and significantly increase the value.
Finally, whatever you do, make sure you're making decisions you're comfortable with, using the guidance of an experienced realtor. Partnering with an experienced real estate professional with your best interest at heart will help you better navigate the process of buying Main Line real estate in 2022.