Will house prices drop in 2022?
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 year-on-year, 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 about a third of buyers in 2021 purchased their homes for above the 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, 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 had about 800,000 new-home sales. Existing-home sales are anticipated to dip to 5.9 million, down from last year, which is expected to have had about 6 million sales of existing homes.
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.
