Experts predict what the 2022 housing market will bring

2022: Housing inventory was extremely low throughout 2021, as buyers and investors attempted to capitalize on low mortgage rates and nearly instant equity from home purchases. Experts predict another robust year for buying homes but the volume might not eclipse records in 2021. Elena Berd/Shutterstock/Town News

Last year was great for selling a home but not a great year if you were trying to buy one. Home prices rose sharply and the number of homes for sale declined. Although the 2022 housing market will still tilt toward sellers, it offers a slightly better chance for buyers to snag their dream homes.

The story of 2021 was how quickly home prices accelerated. The national median home price hit $362,800 in June, an all-time high, according to the National Association of Realtors. The Case-Shiller home price index peaked in August when prices rose 19.8% year-over-year that month. Phoenix home prices were up 33.3% annually, San Diego home prices were up 26.2%, and Tampa home prices were up 25.9%.

Low mortgage rates and limited supply helped push prices higher. There were just 1.38 million homes for sale nationally in June, down 23% year-over-year, according to Redfin.

"The ongoing pandemic, including its seismic effect on the U.S. economy and the way Americans live and work, has made 2021's housing market anything but typical," said Daryl Fairweather, Redfin's chief economist. "Remote work, low mortgage rates, a shortage of building materials and wealth inequality that has allowed an influx of affluent Americans to buy vacation homes, to name just a few factors, have come together to create a historic year for real estate. Buyers paid more for homes, bought sooner than they planned, searched outside their hometowns or all of the above. (2021′s) frenzied housing market has been one for the books - but it may become more balanced in 2022."

According to Redfin data, the typical home sold in 15 days last year, and more than 60% went off the market in two weeks.

NAR's profile of home buyers and sellers, an annual report now in its 40th year, found that more than a third of the buyers in 2021 purchased their homes for above asking price. First-time buyers increased to 34% last year, up from 31% in 2020. That was the largest jump since 2017. The typical first-time buyer was 33 years old.

Here's a look at what the housing experts expect in 2022.

National Association of Realtors: 6M existing homes might sell

The housing market was doing well at the turn of the year and may normalize, said Lawrence Yun, the chief economist at the National Association of Realtors.

"All markets are seeing strong conditions, and home sales are the best they have been in 15 years," Yun said. "The housing sector's success will continue, but I don't expect (2022's) performance to exceed (2021's)."

He said sales may decline this year but predicts that they will exceed pre-pandemic levels. His forecast is based on an expectation of more inventory in the coming months. The increased supply will be generated, in part, from new housing construction as well as from the end of forbearance for struggling mortgage payers, a situation that will cause some homeowners to sell.

"With more housing inventory to hit the market, the intense multiple offers will start to ease," Yun said. "Home prices will continue to rise but at a slower pace."

Yun projects that mortgage rates will increase to 3.7% in 2022, pushed up by persistently higher inflation.

NAR surveyed more than 20 economic and housing experts to gauge their expectations of home-price growth, new-home sales and existing-home sales for 2022. The group predicted that median home prices will rise by 5.7% this year. New-home sales are forecast to rise to 920,000 in 2022, up from last year, which is expected to have been around 800,000. Existing-home sales are anticipated to dip to 5.9 million, down from last year, which is expected to have been around 6 million.

The experts identified 10 "hidden gem" housing markets across the country. The locations on the list are: Knoxville, Tennessee; Spartanburg, South Carolina; Fayetteville, Arkansas; Dallas-Fort Worth; Huntsville, Alabama; Tucson, Arizona; San Antonio; Daphne-Fairhope-Foley, Alabama; Pensacola, Florida; and Palm Bay-Melbourne, Florida. Sales of existing homes will rise 6%

Home buyers will have a better chance to find homes in 2022 but will face a competitive seller's market, said Danielle Hale, the chief economist at the real estate listings website.

"Affordability will increasingly be a challenge as interest rates and prices rise, but remote work may expand search areas and enable younger buyers to find their first homes sooner than they might have otherwise," she said.

Hale predicts the price appreciation for existing homes will be 2.9%.

"Affordability challenges will keep prices from advancing at the same pace we saw in 2021 even as ongoing supply-demand dynamics mean prices continue to grow nationwide," she said.

Hale says sales of existing homes will rise 6.6%. She expects 2022 to have the second-highest sales in the past 15 years, surpassed only by 2021.

The number of homes on the market will tick up by 0.3 %, and single-family housing starts will rise 5%, she says, and she expects the 30-year fixed mortgage rate to average 3.3% for most of the year and be at 3.6% by the end of the year.

Homeownership among Hispanics will continue to grow, Hale said.

"Hispanic home buyers are already a sizable share of the housing market, comprising more than one in 10 recent homebuyers, yet still underrepresented relative to their roughly one-in-five share of the U.S. population," she said. "This demographic group is expected to play a growing role in the homebuying market. Notably, recently successful Hispanic home buyers were younger than the population of recent home buyers at large, and a majority were first-time homebuyers."

Redfin: 'A rush to buy homes' before rates rise

The online real estate brokerage doesn't expect the 2022 housing market to be any more predictable than it was in the past two years.

"2022 will bring more balance to the housing market. But don't expect a buyer's market; just more selection, less frenzy and slower price growth," Fairweather said. "We will see a rush to buy homes at the start of the year before mortgage rates rise. That early onslaught of demand will deplete the supply of homes for sale. In the second half of the year, a much-needed increase in new construction will boost sales slightly. In 2022, there will be 1% more sales than in 2021, and by the end of the year, home price growth will slow to 3%."

Fairweather expects mortgage rates to rise to 3.6% by the end of 2022, a trend that should moderate the increase in home prices. With the slowing of double-digit price growth and a slight increase in newly constructed homes, she expects the number of homes on the market to surpass 2018's high of 7.6 million. Because of soaring home prices in cities such as Austin, Atlanta and Phoenix, buyers will move away from the Sun Belt toward more affordable Rust Belt towns such as Columbus, Ohio; Harrisburg, Pennsylvania; and Indianapolis, she predicts.

Zillow: Remote work drive buyers toward larger homes

Economists at the online home sale marketing company say the housing market may not reach the incredible heights of 2021, but they expect it will be anything but slow.

Zillow's forecast calls for 11% home value growth in 2022, down from a projected 19.5% in 2021. It expects sales of existing homes to total 6.35 million, up from an estimated 6.12 million in 2021.

The Zillow economists say the market forces that have given sellers the upper hand over the past two years or so - tight supply after years of underbuilding, and elevated demand because of remote work, U.S. demographics and low mortgage rates - will persist next year. They expect bidding wars on many homes, especially as the market heats up during the spring and summer shopping season.

Because Americans are taking advantage of remote work flexibility to move to larger homes in more-affordable markets, the Zillow economists predict that more Gen Zers and millennials will buy second homes - vacation or investment properties - before primary residences.  

National Association of Home Builders: Taking longer to build, costing more

Low inventory and strong demand should continue to propel the home-building industry in 2022.

Single-family builder confidence remained high at the end of 2021, registering 84 on the NAHB/Wells Fargo Housing Market Index. It peaked at 90 in November 2020, cooled somewhat to start 2021 and then steadily rose to close out the year.

"If we're thinking, 'Why is it still in the 80s despite all the challenges?'" said Robert Dietz, the chief economist at NAHB, "it's fundamentally about the lack of existing home inventory."

Persistent supply-side problems will limit the pace of construction as well as cause home prices to rise. The supply-chain bottleneck has made appliances more expensive and scarce. The Biden administration doubled the tariff on Canadian lumber to 18%, which has increased raw materials costs.

"It's taking longer to build, and it's costing more," Dietz said. "Using the (Producer Price Index) inflation data, we build a basket of goods that are connected to residential construction, and right now, those prices are up about 19% year-over-year."


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