Lehigh Valley Real Estate Market Projections for 2022

The outlook for Lehigh Valley

The Lehigh Valley real estate market is still experiencing a boom despite inflation, an ongoing global pandemic and rising interest rates.

Throughout the US, experts predict that the housing market will continue to have a turbulent year. However, changes in the economy, rising interest rates and a continued shortage of available properties will make it even more challenging for investors to deepen their portfolio bench.

Amidst the turmoil, the Lehigh Valley region remains a strong market for multi-unit properties for investors and tenants. Here are a few milestones we researched regarding the Lehigh Valley real estate market:

2021 set record numbers for Lehigh Valley property investors where most buyers were paying over asking price and closing within two weeks on average
In 2021, Lehigh Valley’s popularity ranked in the top 15 hottest zip codes (18018) in America
The recovery to pre-pandemic numbers on new houses coming on the market is still waning, although 2021 did outperform 2020
Roughly a fifth of homes in the Lehigh Valley market have been purchased by investors over the last decade due to their ability to pay cash on or off the market
Extremely low interest rates and low inventory have turned bidding wars into the norm
About half the housing units in Bethlehem are rentals and in Allentown, more than 60% are rentals
Lehigh Valley rents are outpacing the nation’s 5.3% year over year growth

A softening market is expected

The Lehigh Valley continues to grow with new real estate development opportunities across the region. With new development and gentrification projects such as Easton Yards, the area will continue to grow in its attractiveness to renters. Investors as well as people migrating from cities such as New York and Philadelphia to bedroom communities such as those in the Lehigh Valley will continue to monitor the region’s investment opportunities.

Inflation will drive the Federal Reserve to raise rates (some experts are predicting four rate hikes in 2022) making it more expensive to borrow. We are already seeing signs of softening in the market, which typically goes through a ten-year cycle. There are many indicators, and one is the mortgage business, which we pay a lot of attention to. What happens in the mortgage business happens in the real estate business and vice versa.

What we’ve seen throughout the pandemic is a lack of inventory, inflated prices, bidding wars, fear, selling off—you name it. When demand is high and inventory is low, prices skyrocket. When you start to see more inventory hitting the market, you should expect prices go down. It’s also going to come by way of the foreclosure market. COVID has impacted people in many ways, and much of the fallout from those who have purchased homes may hit critical mass financially and end up walking away via foreclosure.

Jen’s Investor Tip:

Foreclosures will rise

We interact with the banks that foreclose on properties in the Lehigh Valley market and expect there to be an influx of properties released into the market as foreclosures rise. We’re going to see that this year if not this quarter, and as soon as the market gets flooded with properties, we’re going to see a broader softening in pricing and a variety of new investment opportunities.

For investors, it’s a crucial time to start buying again (if you’ve paused given the inflated prices, COVID or otherwise) with demand leveling out. Simultaneously, interest rates are going to increase which is not necessarily bad for investors. As prices start to soften, so does the value of rent. You likely won’t be able to get the same rents this time next year as you are right now with everything being overinflated. More distressed properties will be hitting the market as well as less affordability for homeowners which translates into people who have to continue renting because they can’t afford to buy. 🏠

Jennifer de Jesus