Key highlights from this report:
- A housing market forecast for 2022 predicted steady home-price growth.
- Another outlook said that inventory shortages will remain an issue in 2022.
- Home sales activity is expected to cool next year, partly due to high prices.
We’re getting into housing market forecast “season.” Every year around this time, real estate analysts and economists begin to offer their predictions for the following year. We’ve come across several housing market forecasts for 2022 in recent days, and there will certainly be more coming in the weeks ahead.
So, what is the outlook for 2022? Bearing in mind that real estate predictions are far from certain, the general consensus seems to be that home prices and sales will cool a bit next year.
While prices are expected to continue climbing in most U.S. cities, the gains will likely be smaller than what we’ve seen over the past year. On the sales side, one housing market forecast for 2022 suggested that home-buying demand could “soften” in the months ahead.
Housing Price Forecast Through Fall of 2022
Last month, the real estate data company Zillow published a positive home-price outlook extending through the summer of 2022. And more recently, the group predicted that home values in the U.S. would rise by 11.7% between now and early fall of 2022.
As for this year, Zillow projected that house prices would be up nearly 20% by the end 2021 (compared to a year earlier).
So their home-price forecast stretching into 2022 is a bit more modest than the current year’s gains. And that’s to be expected. In many housing markets across the country, prices have risen substantially over the past 12 – 15 months. So a slowdown would seem logical at this stage.
According to the company’s price forecast issued last month: “Slowing monthly appreciation is not expected to be echoed in slower annual growth until early 2022.”
In other words, they expect to see smaller home-price gains next year.
This outlook mirrors several other housing market forecasts for 2022, including one published by Freddie Mac’s research team. The general consensus among these and other forecasters seems to be that house values will rise more slowly in 2022, compared to the gains recorded over the past year or so.
At this stage, a slowdown in price growth could actually benefit the real estate market and broader economy. It could help us get back to something resembling normalcy and prevent a housing crash scenario. It could also help ease the housing affordability crisis that’s plaguing so many cities across the U.S.
Fewer Home Sales Next Year?
In addition to slower price growth, we might also see fewer home sales next year. Several real estate market forecasts for 2022 have predicted a decline in the number of sales next year, compared to current trends.
In September, researchers from Fannie Mae published their latest “Economic and Housing Outlook.” Among other things, that report pointed to a decline or “softening” of sales activity over the coming months.
To quote that report:
“other indicators, such as purchase mortgage applications and pending home sales, which lead closings by 30-45 days on average, point to near-term softening. As such, we upgraded our Q3 2021 sales forecast … but left our near-term expectation for further softening intact. We believe home purchase demand is cooling somewhat as the housing market normalizes.”
Softening. Cooling. Moderating. We’ve seen these terms a lot lately, in a number of housing market forecasts and predictions for 2022. So there might be something to it.
The Fannie Mae report added that the primary roadblock to home sales is a lack of properties for sale. Certainly, that’s a big part of it. But there’s more to the story as well as well.
In many real estate markets, sky-high home prices have pushed many would-be buyers out of the market altogether. Going forward, this could contribute to a decline in sales activity in many U.S. cities.
Still a Competitive Real Estate Scene
Housing market forecasts for 2022 suggest we could see a bit of a slowdown over the coming months. That would be a welcome change, after many months of overheated home-buying frenzy.
But don’t let those predictions fool you. When a turbocharged real estate market slows down slightly, it’s still moving at a pretty fast pace.
Last month, Zillow data analyst Nicole Bachaud explained it this way:
“the major demand drivers that have pushed the [housing] market to extremes this year are still present – we’re moving from a white-hot mid-summer to somewhere closer to red-hot as we head into the fall.”
The bottom line here is that the U.S. real estate market might be a little better for buyers in 2022. But in most cities, it will still continue to favor sellers. Low supply levels are the number-one reason for this.
Disclaimer: This article contains housing market forecasts and projection for 2022. Those predictions were issued by third-party sources not associated with the publisher. The Home Buying Institute makes no claims about future real estate or economic conditions.