Let us discuss the most talked-about housing market predictions for 2022. Here are some educated guesses as to what the future of the US housing market will look like based on what real estate pros are saying. The housing market has had an outstanding year, with record low-interest rates, the strongest yearly growth in single-family home prices and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years.
Strong price appreciation, scarcity of inventory, and high demand. That does not appear to be decreasing, even in some of the country’s most expensive markets, the tier one markets. What is the state of the housing market? And this appears to be a frequently asked question. Everybody is talking about housing, but how is the market doing? Are we ascending? Are we on the decline? Is there a risk that rates will continue to rise or that housing prices will continue to appreciate?
The overarching question is how the housing market is doing or will it crash in 2022? The simple answer is that it will not crash. The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to stay robust, with many of the trends that propelled real estate to new heights last year remaining firmly in place this year as well. Last year, homeowners saw a market in which their properties sold quickly and frequently above the asking prices, as numerous home buyers fought for the winning bid.
The housing market is coming off a year in which home prices in the United States increased by an unsustainable 18.8%. Will the market continue to grow at this rate or will it be a little less frenetic this year? The housing market is even tighter now than it was prior to the spring 2021 housing frenzy. Even industry titans like Zillow increased their bullishness in January, increasing their projected home price growth rate for 2022 up to 16.4 percent. The c
However, Zillow determined this month that even that rate was too conservative. The home listing site now predicts that the year-over-year rate of home price growth will hit 22% in May — an acceleration in-home price growth. It would then gradually slow through February 2023 by the end of which the typical U.S. home is expected to be worth almost $400,000. This robust long-term outlook is driven by their expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes.
According to another study by Zillow, the total value of the private residential real estate in the United States increased by a record $6.9 trillion in 2021, to $43.4 trillion. Since the lows of the post-recession market and the corresponding building slump, the value of housing in the United States has more than doubled. The most expensive third of homes account for more than 60% of the total market value. The market value hit the $40 trillion mark in June of last year and since has been gaining an average of more than half a trillion dollars per month.
Housing Market Predictions 2022
One of the most widely held housing market predictions for 2022 is that inventory will remain scarce but price appreciation will be slower than it was this year. While spring and summer will likely see an increase in listings, it is unlikely that there will be enough to meet demand. The housing market has been particularly robust in 2021, with high demand for homes in almost every area of the nation. The same trend will follow in 2022.
The shortage of inventory has created a red-hot housing market, with homes selling within hours of being listed, frequently for well over the asking price. According to many housing experts, buyers can predict similar trends this year to those seen over the last two years: increased prices, low inventory, and quick turnaround.
However, some significant hurdles are approaching the US housing market. Most experts had predicted mortgage rates for housing to rise this year. The cost of borrowing money through mortgages has been steadily increasing this year. Most experts predicted that mortgage rates would climb this year, but they did so more quickly than expected, averaging more than 4% for 30-year fixed-rate mortgages in mid-February.
According to Bankrate, as of March 1, 2022, the national average 30-year fixed-mortgage rate is 4.30 percent, up 8 basis points over the last week. Last month on the 1st, the average rate on a 30-year fixed mortgage was lower, at 3.78 percent. The average rate for a 15-year fixed mortgage is 3.51 percent, up 7 basis points from a week ago.
At the current average rate, you’ll pay a combined $489.02 per month in principal and interest for every $100k you borrow.
Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $448 per $100k borrowed.
The average rate on a 5/1 ARM is 2.94 percent, up 1 basis point from a week ago.
Monthly payments on a 5/1 ARM at 2.94 percent would cost about $415 for each $100,000 borrowed over the initial five years.
While today’s rates are not outrageous by historical standards, they are much higher than they have been in years, which is likely to have a few knock-on consequences in the US housing market – though they are unlikely to produce significant declines in housing prices. While quickly rising mortgage rates may dampen the strong housing demand somewhat, do not anticipate a halt to home price appreciation. A slower rate of appreciation is more likely.
Even with rising mortgage rates and higher prices, the housing market should remain strong due to very tight inventories and increasing demand as more millennials are projected to buy houses in 2022. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country.
This is encouraging news for the millions of millennials who are approaching peak homebuying age. Millennials are the largest generation in history, and they are already in their mid-thirties, approaching their prime home-buying years. They were delayed in purchasing a home, but are now back in full force. Thus, we have two, four, or five years of millennial homeownership.
According to Fannie Mae’s National Housing Survey in February, the good news is that people still think it’s a good time to sell a house. The bad news is that they don’t think it’s as good a time to buy one because of concerns over rising home costs and mortgage interest rates.
The percentage of respondents who say it is a good time to buy a home increased from 25% to 29%, while the percentage who say it is a bad time to buy decreased from 70% to 67%. As a result, the net share of those who say it is a good time to buy increased 7 percentage points month over month.
The percentage of respondents who say it is a good time to sell a home increased from 69% to 72%, while the percentage who say it’s a bad time to sell remained unchanged at 22%. As a result, the net share of those who say it is a good time to sell increased 3 percentage points month over month.
The percentage of respondents who say home prices will go up in the next 12 months increased from 43% to 46%, while the percentage who say home prices will go down increased from 14% to 16%. The share that predicts home prices will stay the same decreased from 35% to 32%. As a result, the net share of Americans who project home prices will go up increased by 1 percentage points month over month.
The Fannie Mae (FNMA/OTCQB) Home Purchase Sentiment Index® (HPSI) increased in February by 3.5 points to 75.3. The HPSI is down 1.2 points compared to the same time last year as affordability constraints continue to drive consumers’ perception of the housing market. High home prices continue to be the most commonly cited reason by consumers for their belief that it’s a good time to sell (and a bad time to buy) a home. The HPSI is constructed from answers to six of 100 national housing survey questions that solicit consumers’ evaluations of housing market conditions and address topics that are related to their home purchase decisions.
Will The Housing Market Crash in 2022?
Here is when housing market prices are going to crash. While this may appear to be an oversimplification, this is how markets operate. When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren’t enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind to catch up. Thus, to see significant declines in home prices, we would need to see significant declines in buyer demand.
Demand declines primarily as a result of rising interest rates or a slowing economy in general. Thus, there will be no crash in home prices; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” or slow down in 2022. The year 2022 is expected to be a healthy one for the housing market.
Mortgage rates are expected to increase somewhat but stay historically low, home sales will reach a 16-year high, and price and rent growth will drop significantly compared to 2021. Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than in 2021.
With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance. Housing market forecasts are essentially informed guesses based on existing patterns.
While the real estate pace of last year appears to be reverting to seasonality as we approach 2022, demand is not waning. Increasing interest rates will almost certainly have a greater impact on the national housing market in the early months of 2022 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers this year. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.
The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply. Economic activities are ramping up in all sectors, mortgage rates are rising, and jobs are also recovering. The housing market remains largely a seller’s market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers.
Forecasting home price appreciation is a challenging task. While inventory has increased slightly, it remains significantly below pre-pandemic levels and is simply unable to meet current demand. Tight supply following years of underbuilding, combined with increased demand due to remote work, US demographics, and low mortgage rates — will continue to be a factor in 2022. It will continue to be a seller’s real estate market in 2022. Expect to see bidding wars on several houses, especially as the spring and summer shopping seasons approach.
Let’s look at what real estate professionals are saying and make some educated estimates about the future of the US housing market.
According to Zillow, the current typical value of homes in the United States is $331,533. This value is seasonally adjusted and only includes the middle price tier of homes. In February 2021, the typical value of homes was $275,000. Home values have gone up 20.3% over the past year and Zillow predicts they will rise 17.8% over the next twelve months, i.e; by the end of February 2023.
Zillow’s housing market forecast for 2022 has improved. The real estate listing site now claims that its previous forecast was too pessimistic. The forecasts for seasonally adjusted home prices and pending sales are more optimistic than previous forecasts because sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
Back in December, the company predicted that the 12-month rate of home price growth would decelerate to 11% by the end of the year. Then in January 2022, Zillow revised that figure — saying that we would finish 2022 up 16.4%. As of March, it forecasts that home price rise will peak at 22 percent in May before gradually slowing thereon.
Simply put, Zillow anticipates that the 2022 spring housing market will heat up even more. The main downside risk to its prediction is rising inflation, which increases the likelihood of near-term monetary policy tightening, increasing mortgage rates, and weighing on housing demand.
Their bullish long-term outlook is based on their expectation that tight market conditions will persist, with housing demand exceeding supply.
Zillow expects annual home value growth to continue to accelerate through the spring, peaking at 22% in May before gradually slowing to 17.8% by February 2023.
Monthly home value growth is also expected to continue accelerating in the coming months, rising to 1.8% in March and growing to 2% in both APRIL & MAY before slowing somewhat.
By the end of February 2023, the typical U.S. home is expected to be worth more than $400,000.
Existing sales volume (SAAR) is expected to remain the same in March as in February, before climbing slightly to around 6.4 million, where it is forecast to remain through the remainder of the year.
Overall, Zillow expects 6.416 million existing homes to sell in 2022, up 4.8% from an already strong 2021.
Existing sales volume (SAAR) is expected to grow throughout the spring home shopping season, before falling very slightly beginning in July.
Source: Zillow
The robust long-term outlook is driven by the expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes. While Zillow’s housing market forecast is bullish, it is also a bit of an outlier when compared to CoreLogic’s forecast. The CoreLogic Home Price Index Forecast has the annual average rise in the national index slowing from 15% in 2021 to 6% in 2022. Homes for sale should stay on the market a little longer with fewer people competing for them, which should keep prices from rising too quickly.
On the other hand, Fannie Mae’s housing market prediction is less bullish than Zillow’s. According to their recent housing market forecast, home price growth will remain strong but decelerate. They predict the effects of worsening affordability to lead to a drag on home price growth. They still expect strong appreciation for this year as inventories currently remain very tight and measures of buyer traffic remain robust. Fannie Mae’s expectation of 7.6 percent growth in 2022 is still considerably higher than the average pace of 5.4 from 2012 to 2019. However, this represents a large deceleration from 2021’s expected record house price growth of 17.3 percent.
Source: Fannie Mae’s Economic & Housing Outlook
The FMHPI is an indicator for typical house price inflation in the United States. It shows that home prices increased by 11.3 percent in 2020 and 15.9 percent in 2021, as a result of robust housing demand and record low mortgage rates. According to Freddie Mac’s recent housing forecast, house value growth in 2022 will be less than half of what we’ve witnessed last year.
Given the anticipated rise in mortgage rates, Freddie Mac anticipates some cooling in housing demand, forecasting house price growth to slow from 15.9 percent in 2021 to 6.2 percent in 2022 and then to 2.5 percent in 2023. Home sales were strong in 2021, with fourth-quarter home sales expected to come in at 7.1 million. They forecast home sales to hit 6.9 million in 2022 and increase to 7.0 million in 2023.
The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. Strong house price growth is expected to lift home purchase mortgage originations from $1.9 trillion in 2021 to $2.1 trillion in 2022.
With a higher mortgage rate forecast for 2022 and 2023, they anticipate refinancing activity to soften, with refinancing originations declining from $2.7 trillion in 2021 to $1.2 trillion in 2022 and $930 billion in 2023. Overall, the company forecast total originations to decline from the high of $4.7 trillion in 2021 to $3.3 trillion in 2022 to $3.1 trillion in 2023.
Source: Freddie Mac
Redfin’s chief economist forecasts that 30-year fixed mortgage rates will gradually rise from around 3% to around 3.6 percent by the end of the year, owing to the pandemic subsiding and inflation persisting. By late fall, the combination of high mortgage rates and already-high housing prices will likely slow annual price growth to around 3%. This low rate of price growth is likely to deter speculators from entering the market, giving first-time homebuyers a better chance of obtaining a home.
A respite of this kind means a return to normalcy in 2022. If you look at America’s house price history, they tend to rise over the long term, between 3% and 5% every year. According to Black Knight, a real estate and mortgage data analytics company, annual home price growth has seen a 25-year average of 3.9%. In 2019, the average annual price gains marginally decreased to 3.8 percent, the first time since 2012 they have decreased. The significant double-digit gains witnessed over the last year are an exception caused by an overheated US housing market.
Such quick price increases are typically unsustainable in the long run, as they exhaust many potential homebuyers. A 7.4 percent gain in home prices would be more in line with historical trends. If you’re wondering what the state of the housing market will be like over the next six months, especially if you’re an investor, then here is some good news for you. The mismatch between supply and demand is driving prices higher, but this isn’t a housing bubble.
Many experts were predicting that the pandemic could lead to a housing crash worse than the great depression. But that’s not going to happen. The market is in much better shape than a decade ago. The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic period.
Housing Market Predictions 2023
Fannie Mae predicts that a double-digit home price rise will continue until the middle of 2022. Still, it won’t be until 2023 that home value appreciation recovers to the pre-pandemic rate of 5%. Based on this, prospective investors may be pessimistic about the 2023 market. They predict that the average 30-year mortgage rate will rise modestly to 3.5 percent by the end of 2023, up from 3.7 percent pre-pandemic. Low borrowing costs provide buyers with minimal relief as prices climb, which is good news for investors trying to flip properties.
While prices are not expected to fall, Fannie Mae anticipates that price growth will be slower than usual in 2023. A slowing in the home price appreciation and possibly increased inventory could help avoid a real estate market disaster in 2023. Many potential purchasers, particularly millennials, have been priced out of the market as home prices have grown at an exponential rate.
Purchase mortgage origination volumes are expected to grow to $2.1 trillion in 2023, $27 billion higher than the previous forecast. The refinance originations are expected to be around $1.1 trillion in 2023, as the impact from stronger home prices and higher interest rates are projected to offset each other.
This has been beneficial to house flippers, but that may alter in the 2023 housing market. Mark Zandi, the chief economist of Moody’s Analytics, said he is concerned about a harsh landing in the housing market, but he believes the market and economy will not collapse like they did last time. He believes that for the 2023 housing market, home prices will level off, decreasing in certain sections of the country while rising somewhat in others. In comparison to the rise in 2022, this prediction for 2023 appears fairly reasonable.
Will Housing Prices Go Down in 2022?
The prices are not going down in 2022. The various forecasts from experts show that 2022 will remain a sellers’ housing market, and home values are expected to increase by double-digit percentage points. While affordability concerns continue to grow, low mortgage rates, increased savings, and a strengthening job market all contribute to making homeownership more accessible to a wide number of prospective buyers.
Realtor.com’s February 2022 real estate data points out that this year’s housing market is heating up unusually early. The national median listing price has eclipsed last year’s July seasonal peak, and time on the market is dropping quicker than typical as the spring season approaches. This indicates a competitive early spring homebuying season.
However, inventory trends are beginning to improve, as the rate of inventory loss has slowed and inventory is increasing in a couple of metro areas around the country. Additionally, we anticipate an increase in seller activity next month, since more newly listed houses entered the market in the latter weeks of February than at the same time last year.
In February, the nationwide median listing price for active listings was $392,000, an increase of 12.9 percent year over year and 26.6 percent compared to February 2020.
In large metros, median listing prices grew by 7.8% compared to last year, on average.
18 out of the largest 50 metros saw an increasing share of price reductions in February, compared to just 9 in January.
Nationally, the typical home spent 47 days on the market in February, down 17 days from the same time last year and down 32 days from February 2020.
The median house listing price per square foot increased by 14.3% year-over-year in February, and the median listing price for a typical 2,000 square-foot single-family home rose 20.2% compared to last year. Price growth in the nation’s largest metros is slowing slightly lower than in other areas, but the primary reason is new inventory bringing relatively smaller homes to the market.
Housing Markets that saw the largest year-over-year increase in listing prices in February:
Las Vegas, where the median listing price grew by +39.6%
Miami, where the median listing price grew by +31.6%
Tampa, where the median listing price grew by +31.5%
Housing Markets that saw the greatest increase in their share of price reductions compared to last year:
Austin (+3.3 percentage points)
Milwaukee (+2.1 percentage points)
Pittsburgh & Baltimore (+1.4 percentage points)
In February, home prices increased 15.0 percent to $357,300, marking the 120th consecutive month of year-over-year gains. After 10 straight years of price hikes, the current median home sales price in the United States is more than twice the median of $155,600 in February 2012, when the current streak began. Much of the growth was fueled by an 18.1 percent increase in property prices in the South. All other regions experienced home price growth of between 7% and 8%.
The median existing single-family home price was $363,800 in February, up 15.5% from February 2021.
The median existing condo price was $305,400 in February, an annual increase of 10.9%.
The median price in the Northeast was $383,700, up 7.1% from one year ago.
The median price in the Midwest was $248,900, a 7.5% climb from February 2021.
The median price in the South was $318,800, an 18.1% jump from one year prior.
For the sixth straight month, the South experienced the highest pace of price appreciation compared to the other regions.
The median price in the West was $512,600, up 7.1% from February 2021.
According to the most recent housing market forecast (by realtor.com), home price growth will slow further in 2022 but will continue to rise. As housing costs continue to consume a greater portion of home purchasers’ paychecks, buyers will become more inventive. Many will take advantage of continued workplace flexibility to relocate to the suburbs, where many can still find homes at a lower price per square foot than in nearby cities.
Along with this outward push, realtors anticipate that some buyers will relocate entirely, and in the Top Housing Markets for 2022, they anticipate continued growth in the mountains west. Along with lower density and activities that contribute to a high quality of life, these markets have growing technology sectors and remain more affordable than more traditional tech hubs.
While all of the country’s 50 largest markets are expected to grow strongly in 2022, and sellers nationwide should expect to remain in the driver’s seat, there can be only one Number One – and Zillow expects Tampa to top the list, followed by a slew of reasonably priced and rapidly growing Sun Belt markets.
Jacksonville, Raleigh, San Antonio, and Charlotte round out the top five hottest markets for 2022, each bolstered by a mix of strong anticipated house value increase, robust economic fundamentals such as high employment growth, low inventory, and a plentiful pool of probable purchasers. Additionally, these areas have historically been relatively unaffected by rising mortgage interest rates or a weakening stock market – two potential danger factors for housing and the economy as the calendar flips.
The year’s coolest markets are likely to include New York, Milwaukee, San Francisco, Chicago, and San Jose – each of which has fewer new jobs and less favorable demographic trends than other large markets but is still expected to do well on its own.
The housing market has made an amazing comeback in the last quarter of 2021, following two consecutive quarters of decreases in existing home sales. Looking at the current trends, the existing home sales will rise in 2022 as a result of low mortgage rates, a strong labor market, and moderated house price growth.
Home value growth is trending upward in most large markets, while inventory is trending downward, implying a more competitive market this winter. The annual rate of growth is an all-time high in data dating back more than 20 years, and the monthly rate is higher than at any point before the pandemic — though it is still significantly lower than the all-time high of 2% set in July.
The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years. Recent double-digit price rises reflect the convergence of exceptional demand and chronically low supply. Prices are increasing as a result of enough money on the sidelines and very low mortgage rates. The improving economy and the approaching peak homebuying years of millennials are driving a residential housing boom.
The housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes. Low mortgage rates, coupled with more work-from-home possibilities created by the pandemic, have also fuelled a rise in housing demand, especially in lower-density suburbs. Detached single-family houses continue to be in great demand. These properties provide greater living space and separation from adjacent houses than attached properties provide.
Earlier this year, Realtor.com’s housing market forecast for 2021 had predicted that the housing boom will continue but the seasonal trends will normalize. Their latest housing forecast for 2022 predicts that the market will continue to cool following the spring frenzy that saw prices soar to unprecedented heights. Prices, on the other hand, will remain high, inventory will remain scarce, and mortgage rates will climb.
Home sales prices are expected to continue rising, resulting in a decade-long string of year-over-year gains beginning in early 2022.
Looking ahead, Realtor.com anticipates that with economic growth projected to sustain enthusiastic purchasers’ spending power, the median home sales price will continue to rise, gaining 2.9 percent in 2022, a somewhat slower rate.
Homebuyers will face increased monthly costs as a result of rising prices and borrowing rates.
Affordability constraints will prevent prices from increasing at the same rate as they did in 2021, even as supply-demand factors continue to drive prices upward nationwide.
The housing market will remain competitive for buyers in 2022, particularly those looking for homes in entry-level price tiers.
Numerous protective buyers (millennials) imply rising property prices, which, when paired with rising mortgage rates, would result in greater monthly payments for buyers.
House Rent Price Forecast
Renters will see increasing rents in 2022.
The rental vacancy rate has remained at its epidemic lows (between 5.7 percent and 6.8 percent).
In 2022, they forecast that this tendency will continue, resulting in continued rent growth.
Nationally, the rent growth of 7.1 percent is forecasted over the next 12 months, slightly ahead of home price growth, as rents continue to recover from earlier in the pandemic’s slower rise.
Will The Housing Sales Decline in 2022?
According to Realtor.com, at a national level, they expect to see continued home sales growth in 2022 of 6.6% which will mean 16-year highs for sales nationwide and in many metro areas.
With almost 45 million millennials between the ages of 26 and 35 who are prime first-time homebuyers in 2022, housing demand is likely to continue strong.
2022 is expected to have the 2nd highest sales level in the last 15 years, bested only by 2021.
First-time homebuyers will need to be successful in the 2022 housing market if we are going to see the homeownership rate begin to climb again.
Home sales in the U.S. rose in the first month of 2022, while the number of homes for sales touched a new record low. Existing house sales jumped 6.7 percent to a seasonally adjusted 6.50 million units in January 2022 from a month earlier, the highest rate in 12 months, according to the National Association of Realtors (NAR). The number of sales was down 2.3 percent from the same month a year ago. However, the existing home sales slowed slightly in February, falling 7.2 percent from January’s 6.5 million pace.
Home sales also fell 2.4 percent year over year but remained barely above the 6 million mark for the sixth straight month (6.02M). Rising mortgage rates, which approached 4% in February but did not break through until the third week of March, continue to attract homebuyers, despite a record-low inventory of homes listed for sale. Consumers had a strong incentive to act swiftly on listed homes when submitting new offers and to complete current agreements this week, as the Fed rate hike was widely anticipated.
The rate is now considerably higher at 4.5%. “It will be very interesting to observe what’s going to happen in the coming months as mortgage rates make a much more meaningful jump,” said Lawrence Yun, chief economist for the Realtors.
Sales of homes priced between $100,000 and $250,000 fell 26% year over year. Sales of homes priced between $750,000 and $1 million increased 24%. Sales of homes priced above $1 million jumped 21%. The number of sales of homes under $100,000 decreased by 16.4% year over year, while sales of homes between $250,000 and $500,000 increased by 2.8%. Few sales are occurring in the low end because of the lack of inventory. Therefore, more supply is needed at the lower end of the market to boost sales.
First-time buyers, who are typically looking for homes at the lower end of the market, accounted for 29% of all transactions, a tiny increase from January but well below the historical norm of roughly 40%. With today’s mortgage rates and rising property prices, purchasers are spending 28 percent more on a monthly payment today than they would have a year ago for the identical home.
Individual investors or second-home buyers, who make up many cash sales, purchased 19% of homes in February, down from 22% in January but up from 17% in February 2021. All-cash sales accounted for 25% of transactions in February, down from 27% in January and up from 22% in February 2021.
Single-family home sales dropped to a seasonally adjusted annual rate of 5.35 million in February, down 7.0% from 5.75 million in January and down 2.2% from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 670,000 units in February, down 9.5% from 740,000 in January and down 4.3% from one year ago.
The South accounted for over half of all the sales in January, accounting for 46 percent, followed by the Midwest at 22 percent and the West at 20 percent, with the Northeast accounting for only 12 percent. The highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 43% of total home sales seen in February. The price segment in the $100,000 to $250,000 range accounted for 23.1% of total home sales.
Existing Housing Sales in February 2022
(Regional Breakdown By N.A.R.)
Northeast
Existing-home sales slipped 11.5% in February, registering an annual rate of 690,000, a 12.7% drop from February 2021.
The median price in the Northeast was $383,700, up 7.1% from one year ago.
Midwest
Existing-home sales sagged 11.3% from the prior month to an annual rate of 1,330,000 in February, a 1.5% decrease from February 2021.
The median price in the Midwest was $248,900, a 7.5% climb from February 2021.
South
Existing-home sales fell 5.1% in February from the prior month, posting an annual rate of 2,790,000, an increase of 3.0% from one year ago.
The median price in the South was $318,800, an 18.1% jump from one year prior.
West
Existing-home sales slid 4.7% from the previous month, reporting an annual rate of 1,210,000 in February, down 8.3% from one year ago.
The median price in the West was $512,600, up 7.1% from February 2021.
Will Housing Supply Increase in 2022?
With homes continuing to sell at a rapid pace, inventory will remain constrained, but they expect the market to recoup from its 2021 lows.
Inventory is predicted to expand by an average of 0.3 percent in 2022.
With 28% of homeowners deciding not to sell stating that they are unable to find a new house to purchase.
An increase in inventory could be self-reinforcing, attracting additional potential sellers as they find properties to purchase.
The increased new construction will eventually contribute to this upward tendency as well.
Even as for-sale inventory increases, creating competition for some sellers, well-priced homes in good condition will continue to sell rapidly in many regions.
Today, housing is in extremely short supply. Although more properties were listed for sale in February than in January, there were just 870,000 available at the end of the month, a 15.5 percent decline year over year. That equates to a 1.7-month supply at the current rate of sales, which is close to an all-time low. Prices continued to rise as a result of limited supply and strong demand. Supply is leanest on the lower end of the market (priced between $100,000 and $250,000) which also affects the sales.
Realtor.com’s Feb data showed that active inventory remains historically low. The total number of unsold homes nationwide–a metric that includes active listings and listings in various stages of the selling process that are not yet sold– is down 15.3% percent from February 2021. The newly listed homes also declined by 0.5% on a year-over-year basis. Sellers are still listing at rates 13.8% lower than typical 2017 to 2020 February levels.
This is the sixth consecutive month in which new seller activity has been lower than last year, contributing to lower inventory. As new properties are coming on the market every week they are also being sold quickly. The total housing supply is not enough to mark it as a buyer’s real estate market and it is not equal to what is needed to relieve the historically tight home supply.
Housing inventory in the 50 largest U.S. metros overall decreased by 22.1% over last year in February, a decrease in the rate of decline compared to last month’s 27.6% decrease. Regionally, the inventory of homes in western and southern metros are showing the largest year-over-year decline (-27.5%) followed by the Northeast (-24.2%), West (-20.6%), and Midwest (-12.5%). Inventory declined in 46 out of 50 of the largest metros compared to last year, but four metros saw inventory growth.
Housing Markets that saw the year-over-year increase in inventory in February:
Riverside, where newly listed homes grew by +6.3%
Phoenix, where newly listed homes grew by +4.2%
Austin, where newly listed homes grew by +1.2%
Sacramento, where newly listed homes grew by +0.3%
The housing markets which saw the highest year-over-year growth in newly listed homes included:
Milwaukee (+21.9%)
New York (+19.5%)
Oklahoma City (+16.3%)
The housing markets that are still seeing a large decline in newly listed homes compared to last year included:
Raleigh (-24.1%)
Charlotte (-22.4%)
Austin (-16.7%)
Which Housing Markets Are Expected to Be Hottest in 2022?
Before the pandemic, the housing market was remarkably strong. The coronavirus crisis response was unprecedented. Following a significant dip in the spring of 2020, homebuying surged back that summer and hasn’t slowed since, much to the delight of sellers and dismay of buyers. Homebuyers supported by low-interest rates have kept the US housing market afloat.
The pandemic has certainly affected every sector but the residential real estate market has been very resilient and it continues to be a pillar of support for the economy. The housing market bounced back in 2020 much faster than other sectors of the economy and has sustained that growth and pace into 2021.
2021 was a record-breaking year for the US housing market. According to Zillow, home prices continue to rise month after month. Home values have increased between 25% and 33% between the end of 2019 and now, depending on the index. This is more than double the growth experienced by housing prices over the two years from 2017 to 2019, according to all three indexes.
There are additional underlying forces at work that are unrelated to Covid but contribute to the current mix of low supply and high demand Many renters view property ownership as a way to safeguard their housing budgets against inflation, as the monthly cost of housing continues to rise across the United States. Rents increased nearly 16% year over year in December, according to Zillow’s national rent index.
13 metro areas tracked by Zillow with over 1 million residents, including Austin, Texas, and Salt Lake City, saw home values increase by more than 25% in 2021. Another seven saw a more than 20% increase in home prices. While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition.
That seller’s market is likely to continue into the first quarter of this year, as the momentum from 2021 continues to attract eager buyers. So, the housing market is still hot, but we may be starting to see rising home prices hurting affordability unless the mortgage rates stop rising back to pre-pandemic levels.
The US housing market is ripe for investment in 2022, making it a great time to buy an investment property to increase your cash flow.
Real Estate Investment Forecast (By Realtor.com)
In 2022, investors will continue to earn a healthy return on their housing market investments.
Existing homeowners are in a strong position, and rising rents are likely to tempt investment buyers to continue purchasing properties even as mortgage rates climb.
In the spring of 2021, investors purchased more properties than they sold, and this investor surge persisted into the summer.
If these homes are rented, 2022 will be an ideal year to earn a high return due to strong demand and predicted increases in rental prices.
Furthermore, a multi-generational housing market is creating limited supply and increased competition, driving up prices at the affordable end of the market for the foreseeable future. In hot job markets and communities that fit the youngest generation’s ideals, price increases of 8-15 percent are possible year-over-year. Real estate is appreciating at or just above the rate of inflation. You will find sellers’ markets in most regions of the country, so you need to prepare for real estate investing accordingly.
Find the best investment property for sale and try to get pre-approved for financing well in advance. Paying a mortgage on a home can serve as a forced savings account and help you build equity over time. Lastly, take the help of a good real estate agent/broker to write a great purchase offer and beat out the competition. Real estate activity has been going on at an unusual pace. The housing sales recovery is strong, as buyers are eager to purchase homes and properties that they had been eyeing during the shutdown.
As the population of millennials is increasing, the demand side of housing remains strong. Many buyers need to get into a larger home because they have a growing family. Those interested in purchasing homes are looking at the enticing low mortgage rates. Housing inventory will remain low, despite plenty of new construction the number of homes for sale would still fall well short of demand in 2022. Buyers will stay focused on the suburbs. We can expect a wave of mortgage refinances to save money.
Buying a home in a seller’s market can feel like you’re losing money. Demand is robust throughout the country, but many homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices. You may just wait a few months or even a year so that prices will flatten (or come down).
The problem is that prices could keep rising to the point where you’re priced out of the market. There’s no guarantee either way. You can opt to refinance at today’s rates to at least cut your monthly mortgage payments. The present scenario makes it appealing to buyers who have been spending all this money on rent.
Realtor.com’s top 10 housing markets for 2022 have substantial momentum from 2021 which they will carry into 2021. Salt Lake City will lead the pack for home price appreciation and sales growth. These metros are in a prime position to see an uptick in home sales and rising prices in 2022. Low mortgage rates throughout most of this year helped these markets see price and sales growth on top of 2020’s high levels. Economic momentum coupled with healthier levels of supply will position these markets for growth in 2022.
Boise ranks number two. Boise home prices are predicted to increase by 7.9 percent while sales will increase by 12.0 percent. Spokane Valley ranks at #3 where the median home price is expected to rise 7.7 percent in 2022. Harrisburg, Indianapolis came in at No. 4 on the list. Its relative affordability will boost sales by 14.8% in 2022 while the median will grow at a modest rate of 5.5%.
Here are the top 5 housing markets in 2022 forecasted by Realtor.com:
1. Salt Lake City, Utah
Median home price: $564,062
Project home price increase: 8.5%
Projected increase in home sales: 15.2%
Combined sales and price growth: 23.7%
2. Boise City, Idaho
Median home price: $503,959
Project home price increase: 7.9%
Projected increase in home sales: 12.9%
Combined sales and price growth: 20.8%
3. Spokane-Spokane Valley, Washington
Median home price: $419,803
Project home price increase: 7.7%
Projected increase in home sales: 12.8%
Combined sales and price growth: 20.5%
4. Indianapolis-Carmel-Anderson, Indiana
Median home price: $272,401
Project home price increase: 5.5%
Projected increase in home sales: 14.8%
Combined sales and price growth: 20.3%
5. Columbus, Ohio
Median home price: $298,523
Project home price increase: 6.3%
Projected increase in home sales: 13.7%
Combined sales and price growth: 20%
Source: Realtor.com® 2022 Forecast
References
Latest Housing Market Data & Statistics
http://www.freddiemac.com/research/forecast/20220121-quarterly-economic-forecast/
2022 Housing Market Forecast and Predictions: A Whirlwind Year
https://www.nar.realtor/research-and-statistics/housing-statistics/
https://www.zillow.com/research/home-values-sales-forecast-jan-2022-30667/
https://www.zillow.com/research/daily-market-pulse-26666/
https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/
https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
http://www.freddiemac.com/research/forecast/20210715_quarterly_economic_forecast.page
https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
https://www.investopedia.com/personal-finance/how-millennials-are-changing-housing-market
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