We’re fast approaching the end of 2021, and the real estate predictions for 2022 have begun to fly.
Over the past month or so, a slew of housing and mortgage-related forecasts have come online. And while they differ in some ways, there seems to be some general consensus forming.
For instance, many forecasters have suggested that home prices will slow down next year. That seems to be a recurring theme among 2022 real estate predictions.
Experts Make Real Estate Predictions for 2022
Some housing analysts expect to see a major slowdown in home-price growth next year. Others believe that buyers will have more inventory to choose from, compared to this year. Affordable housing markets could see an influx of buyers in 2022. And the general consensus for mortgage rates is that they’ll trend upward over the coming months.
Here’s a look at these and other real estate predictions for 2022:
1. A major slowdown in home-price growth?
Numerous forecasts have suggested home prices in the U.S. will rise more slowly in 2022, compared to the tremendous growth of 2021. The latest price-related prediction for 2022 came from Redfin, a national real estate brokerage.
In a recent report, housing analysts from Redfin predicted that house values would rise a lot more slowly in 2022. The brokerage suggested that prices could rise by 3% next year. That would be a significant slowdown compared to the 16% – 19% increase recorded during 2021.
This is one of several real estate market predictions for 2022 that points to a cooling trend over the coming months.
According to Redfin’s chief economist Daryl Fairweather:
“If annual price appreciation falls to 3% [in 2022], it would only be the second time it will have fallen so low since the end of the housing crash in March 2012. This low price growth will likely discourage speculators from entering the market and allow more first-time buyers to have a chance at winning a home.”
Other forecasters have issued stronger price predictions for the U.S. real estate market in 2022. In a forecast issued earlier this month, researchers from Fannie Mae predicted that prices would rise by round 7.8% in 2022. And last month, Zillow predicted that home values in the U.S. would rise by 13.6% through September 2022.
The one thing almost everyone seems to agree on is that prices will continue climbing in most U.S. cities, to some degree. And that’s a pretty big deal, when you consider how much house values skyrocketed during 2021.
The bottom line: Home buyers planning a purchase in 2022 might want to consider doing it sooner rather than later.
Related: Why prices will keep rising in 2022
2. More inventory overall, but few starter homes
Tight supply conditions have challenged home buyers throughout 2021, and that will likely remain an issue next year as well. Even so, we could see some much-needed inventory growth over the coming months.
Such an increase could come from two sources: (1) more homeowners deciding to list their homes, and (2) more new houses being built.
Home builders have been trying to ramp up production to meet the strong demand from buyers. But that’s an uphill climb at the moment. Builders are being hampered by everything from supply-chain snags to labor shortages.
So there’s both good and bad news on this front. Overall, housing market inventory is expected to rise in 2022 compared to the current abysmally low levels.
But there still won’t be enough homes for sale compared to the number of buyers seeking them. Lower-priced “starter homes,” in particular, could be in short supply next year.
According to Ali Wolf, chief economist for the homebuilding research company Zonda:
“New home inventory should increase from 2021’s bottom, but we anticipate the market will remain undersupplied [in 2022]. Entry-level home supply in particular will remain extremely constrained. I can’t imagine we get to a point where we are flush with entry-level homes.”
So there’s another real estate prediction for 2022. We might see more houses coming onto the market in the months ahead. But buyers will still have to bring their ‘A’ game, when it comes to house hunting and negotiations. From an inventory standpoint, the market will probably continue to favor sellers throughout 2022.
3. Continued migration toward affordable housing markets
Over the past 15 months or so, we’ve seen a new kind of migration pattern in the United States. Many people have fled the nation’s priciest real estate markets in favor of more affordable locales. The rise of remote work, among other factors, has contributed to this trend.
Real estate predictions for 2022 suggest more of the same, on this front.
Relatively affordable housing markets, like many midwestern and eastern cities, could see an increase in demand in 2022. Would-be buyers who have been priced out of more expensive markets will likely shift their focus. They’ll seek out cities where they can get more house for the money.
According to Redfin’s real estate predictions for 2022:
“cost-conscious homebuyers will seek out affordable northern cities like Columbus, OH, Harrisburg, PA and Indianapolis, which all happen to be capital cities with highly educated residents where the median home price is still less than $250,000.”
If this prediction turns out to be accurate, competition among buyers could rise in these cities, while inventory levels could drop.
4. Higher mortgage rates ahead
Mortgage shoppers who are waiting for interest rates to drop below 3% again (where they were for much of 2021) might be waiting in vain. Many real estate predictions for 2022 also point to a possible rise in mortgage rates.
In fact, we’re already seeing some upward mobility among mortgage rates in the U.S. As we reported last month, the average rate for a 30-year fixed mortgage had climbed above 3% for the first time in months. They’re expected to go even higher in 2022, according to numerous real estate market predictions.
The Mortgage Bankers Association recently predicted that 30-year home loan rates could approach 4% by the end of 2022 (on average). They were averaging 3.1% last week, according to Freddie Mac.
Of course, these types of mortgage rate forecasts have been wrong in the past. So you probably shouldn’t plan a home purchase around them. It’s just another point to consider, when looking ahead to 2022.
Disclaimer: This report contains real estate market predictions provided by third parties not associated with the publisher. They’re the equivalent of an educated guess. The Home Buying Institute makes no claims or assertions about future housing conditions.