A new forecast for the U.S. housing market in 2022 predicted a general slowdown in the months ahead, as more homes come onto the market. This prediction was issued by researchers from Realtor.com and offers some positive news for frustrated home buyers.
A Positive Forecast for the U.S. Housing Market
The U.S. real estate market shifted into “turbo mode” during the second half of 2020 and maintained that pace into the first part of 2022. But recent reports and forecasts suggest that might be changing.
In the second half of 2022, we could see a slower pace within the housing market as more homes become available. That would bring a welcomed change of pace for home buyers, many of whom have been frustrated by an ongoing supply shortage and a frenzied pace.
One such housing market forecast comes from Realtor.com. In June, the real estate listings company published a report that predicted a general slowdown for the U.S. real estate scene. The company’s housing analysts also expect to see a gradual rise in inventory levels.
Both of these trends would make it easier for buyers to purchase a home later in 2022.
It Might Be Easier to Find a Home Later in 2022
Among other things, the 2022 housing market forecast from Realtor.com predicted that inventory levels could improve this year. The company’s researchers said that more homes are coming onto the market, and that this could continue into the summer months.
According to Danielle Hale, chief economist for Realtor.com:
“Our updated 2022 forecast anticipates that demand will continue decelerating through the summer, providing breathing room for the inventory recovery to accelerate. As a result, this fall could be an opportune time to find a home…”
For many months now, we’ve heard one report after another regarding tight supply conditions within the U.S. real estate market. This was partly due to a surge in home buyer demand that started in the early days of the pandemic.
Now, it seems that change is in the air. This latest housing forecast predicts a slowdown in sales activity, along with some significant (and much-needed) inventory growth. In short, they’re predicting the real estate market will shift in a more buyer-friendly direction later in 2022.
15% Increase in For-Sale Inventory Expected
Realtor.com’s latest forecast, issued in mid-June, is actually an update to a previous one issued at the end of December. They’ve updated their predictions for 2022 based on a recent shift in the housing market, especially where inventory levels are concerned.
Among other things, the company’s revised outlook for the real estate market suggests we could see more significant inventory growth than previously estimated. They expect the for-sale inventory of existing homes to increase by 15% in 2022.
This is a major change from their original forecast, which predicted only a 0.3% increase in inventory during the 2022 calendar year.
They also made signifiant changes to their forecast for home sales. Originally, Realtor.com’s research team predicted that sales would increase by 6.6% in 2022. Now, they expect to see a decline in sales. Existing home sales are expected to decline by 6.7% during 2022, compared to the previous year.
The chart below show their predictions for several housing market metrics, including overall inventory levels, mortgage rates, home sales, and prices. The “original” forecast was issued in December 2021. The update came out yesterday, on June 13.
|Metric (full-year projections)||2022 Forecast (Updated)||2022 Forecast (Original)|
|Mortgage Rates||to 5.5% (average: 5.0%)||3.6% (average: 3.3%)|
|Existing Home Sales||-6.7%||+6.6%|
|Existing Home Median Sales Price||+6.6%||+2.9%|
|Existing Home For-Sale Inventory||+15.0%||+0.3%|
|Single-Family Housing Starts||+5.0%||+5.0%|
The Downside: Higher Mortgage Rates in 2022
This latest housing market forecast offers some good news for home buyers. It predicts higher inventory levels and a slower sales pace, two conditions that could benefit buyers later in 2022.
But it also highlights a less appealing trend we’ve seen in recent weeks — higher mortgage rates.
As the chart above shows, Realtor.com’s analysts expect 30-year mortgage rates to average 5% during 2022, and to hit 5.5% by year’s end. At the end of last year, they predicted that 30-year home loan rates would average 3.3% during 2022.
This revision to their housing market forecast was prompted by a sharp increase in rates that started in March of this year and peaked in May. Back in early January, 30-year mortgage rates were averaging 3.22%. That’s according to the weekly survey conducted by Freddie Mac. By mid-May, however, that average had risen to a 10-year high of 5.3%.
The chart below, provided by Freddie Mac, shows the spike in rates that occurred during the first four months of 2022.
So this latest real estate forecast offers both good and bad news for home buyers across the U.S.
On the upside, buyers could have more properties to choose from later this year, and an overall “calmer” pace within the housing market. But both mortgage rates and home prices are higher now than last year.
Disclaimer: This article contains mortgage and housing market forecasts issued by third parties not associated with the publisher. The Home Buying Institute makes no claims or assertions about future economic conditions. Real estate predictions are the equivalent of an informed guess and should be treated as such.