Washington Post | Experts Predict What the 2022 Housing Market Will Bring


As mortgage rates rise, prices should moderate, but low inventory will continue to be a problem.

By Kathy OrtonYesterday at 8:00 a.m. EST

Last year's “frenzied housing market has been one for the books — but it may become more balanced in 2022,” said Redfin chief economist Daryl Fairweather. (Elijah Nouvelage/Bloomberg)

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 percent year-over-year that month. Phoenix home prices were up 33.3 percent annually, San Diego home prices were up 26.2 percent, and Tampa home prices were up 25.9 percent.

No, the housing market isn’t in a bubble. But there still are many things to worry about in 2022.

Low mortgage rates and limited supply helped push prices higher. There were just 1.38 million homes for sale nationally in June, down 23 percent 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 percent 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 percent last year, up from 31 percent 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

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, a trade association for real estate agents.

“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 percent 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 percent 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, Tenn.; Spartanburg, S.C.; Fayetteville, Ark.; Dallas-Fort Worth; Huntsville, Ala.; Tucson; San Antonio; Daphne-Fairhope-Foley, Ala.; Pensacola, Fla.; and Palm Bay-Melbourne, Fla.

Realtor.com

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 percent.

“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 percent. 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 percent, and single-family housing starts will rise 5 percent, she says, and she expects the 30-year fixed mortgage rate to average 3.3 percent for most of the year and be at 3.6 percent 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 home buyers, 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 home buyers.”


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