Top Housing Market Predictions for The Remainder of 2022

This year, mortgage rates have risen by more than two and a half percentage points. Furthermore, the increasing expenses of purchasing a home have altered many prospective purchasers' calculations. As a result, year-over-year house sales have fallen in recent months. A record 79 percent of respondents in a Fannie Mae study on homebuyer sentiment indicated it's a poor time to buy a home.
Home sales activity kicked out 2022 stronger than anticipated but rising costs have led to alter their forecast downward. Realtor.com now forecasts a 6.7% decline in house sales in 2022. They anticipate the greatest year-over-year decline in house sales at the customary peak of the summer selling season. Home sales on par with these predictions would mean that 2022 sales are the 2nd highest tally since 2007, trailing only 2021.
Sales of existing homes have declined 8.6% year-over-year in May 2022. Declining home purchases means more people are renting. First-time buyers were responsible for 27% of sales in May, down from 28% in April and down from 31% in May 2021. Affordability has been hit with a triple whammy of rising interest rates, fast house price increase, and inadequate supply.
In the second half of 2022, house price growth will moderate, although it has been hotter for longer than anticipated, resulting in an upwardly revised forecast of a 6.6% home price rise for 2022. That's an increase from their previous forecast of 2.2% growth in home prices. More than a decade of chronic underbuilding, coupled with millions of millennials entering the homebuying stage of life, has resulted in a major mismatch in housing supply and demand in the United States.
Therefore, don't forecast a halt in the home price rise despite the fact that mortgage rates are rising significantly. While housing costs remain high, forcing homebuyers to make difficult decisions, it is predicted that the number of properties for sale will continue to increase, building on the reversal that began in May 2022. That is a sign of relief for first-time home buyers. Following a spate of volatility this week, the average rate on 30-year mortgages climbed to 5.78 percent from 5.36 percent the previous week, according to Bankrate’s national survey of large lenders.

Housing Inventory

Inventory of properties currently for sale on a typical June day rose 18.7% over the last year, the highest rise in record history. On an average June day, there were 98,000 more properties for sale than the year before. While overall housing inventory expanded, condominiums (and other connected homes) declined by 0.2%.
Condos, which made up 20.2% of listings in June, are cheaper than single-family homes (17.5% cheaper in the 50 largest metro areas in June 2022) and have gained appeal in high-priced regions as single-family homes prices have risen. The number of unsold properties countrywide, including current and pending listings, was down 1.4% from June 2021. Last month's drop was 3.9%.
Lagged improvement in the overall number of houses for sale is due to slowing buyer demand, pushed by increasing interest rates and all-time high listing prices that have increased the cost of financing 80% of the median property by 57.6% ($745 per month) compared to a year earlier. The number of pending listings on a typical day has fallen by 16.3% compared to last June, indicating a slowdown in demand is slowing inventory turnover. This decelerates from May's 12.6% annual drop. Lower competition and increased seller activity will help homebuyers.
Increasing housing inventory is excellent news for buyers. Homebuyers will have additional options as a greater number of homeowners want to adapt their living situations to changing personal demands and take advantage of favorable market circumstances to access the substantial wealth they have accrued.

• Homeowners continue to be in a favorable position, particularly those who have owned for extended periods of time and amassed substantial wealth. This is forecasted to attract additional sellers looking to capitalize on favorable market circumstances, resulting in increased competition and a rebalancing of the housing market away from its previous seller-friendly bias. This bodes well for seller-buyers who have been disappointed by the scarcity of purchasing possibilities. The forecast for inventory growth of existing homes for sale has increased from 0.3% to 15%

Housing Prices

Inventory of properties currently for sale on a typical June day rose 18.7% over the last year, the highest rise in record history. On an average June day, there were 98,000 more properties for sale than the year before. While overall housing inventory expanded, condominiums (and other connected homes) declined by 0.2%.
Condos, which made up 20.2% of listings in June, are cheaper than single-family homes (17.5% cheaper in the 50 largest metro areas in June 2022) and have gained appeal in high-priced regions as single-family homes prices have risen. The number of unsold properties countrywide, including current and pending listings, was down 1.4% from June 2021. Last month's drop was 3.9%.
Lagged improvement in the overall number of houses for sale is due to slowing buyer demand, pushed by increasing interest rates and all-time high listing prices that have increased the cost of financing 80% of the median property by 57.6% ($745 per month) compared to a year earlier. The number of pending listings on a typical day has fallen by 16.3% compared to last June, indicating a slowdown in demand is slowing inventory turnover. This decelerates from May's 12.6% annual drop. Lower competition and increased seller activity will help homebuyers.
Increasing housing inventory is excellent news for buyers. Homebuyers will have additional options as a greater number of homeowners want to adapt their living situations to changing personal demands and take advantage of favorable market circumstances to access the substantial wealth they have accrued.
Homeowners continue to be in a favorable position, particularly those who have owned for extended periods of time and amassed substantial wealth. This is forecasted to attract additional sellers looking to capitalize on favorable market circumstances, resulting in increased competition and a rebalancing of the housing market away from its previous seller-friendly bias. This bodes well for seller-buyers who have been disappointed by the scarcity of purchasing possibilities. The forecast for inventory growth of existing homes for sale has increased from 0.3% to 15%.

Price Forecast Through 2026

The Zillow home price expectations survey found that the housing market is likely to recover to pre-pandemic, 2019 norms by 2024, at least in terms of inventory and the proportion of purchases made by first-time home buyers. Home prices have grown 32 percent in the previous two years as a result of a shrinking number of properties on the market. The diminishing supply of available properties has been a major contributor.

• Most panel members predict housing inventory to reach pre-pandemic levels by the end of 2024.
• The share of first-time buyers is predicted to stay below 2019 levels until 2024.
• The most bullish quartile of respondents predicted that prices will grow by 46.5 percent between now and the end of 2026, compared to only 10.3 percent for the most conservative group.
• The average response predicts a total increase of 26.8% rise by the end of 2026 or a compound annual growth rate of 4.9 percent in the next (almost) five years.

The total inventory decreased from an average of 1,6 million units per month in 2018 and 2019 to a little over 1 million in 2021 and will decline further in 2022. The largest group of respondents (38 percent) to Zillow's study predicts housing market inventory to rebound to a monthly average of 1.5 million units or higher in 2024. A second-largest of respondents (36 percent) predict that supply will return to pre-pandemic levels in 2023, while the third-highest proportion of votes (12 percent) came from those who believe it will happen in 2025.
The pandemic brought record-breaking price increases and rent increases that made saving for down purchases much harder. As a result, according to a Zillow survey of recent buyers, the percentage of first-time home buyers fell from 45 percent in 2019 to 37 percent in 2021. First-time purchasers would reclaim their pre-pandemic market share within the next two years, with 26 percent predicting 2024 and 25 percent predicting 2025.
About 18% of experts surveyed said they don't expect the percentage of first-time buyers to surge over 45% until after 2030, despite many Millennials, the largest U.S. generation ever will be well into their prime home-buying years far before then. The median age of U.S. buyers is 43, while the average skews higher (45 years old). Almost one in five buyers (17%) are in their twenties or younger, while roughly a quarter (23%) are in their sixties or older. In other words, the age distribution of buyers represents somewhat of a middle ground when it comes to the U.S. population.
They are typically younger than tenured homeowners (those who have not moved in the past year), but older than renters. Buyers tend to have higher household incomes than the U.S. population overall. The annual median household income among buyers is approximately $86,000, compared to the overall national median (2019) of $65,700.
Another Zillow Home Price Expectations survey conducted in June shows that despite a more than 100-basis point increase in mortgage rates since the previous survey just three months ago and the potential for higher rates in coming months, the panel’s expectations for 2022 home price appreciation still rose to 9.3% from 9.0% last quarter. This would be a significant step down from the 19.6% appreciation observed over the 2021 calendar year, but still high above long-term historical averages.
Looking ahead, the most optimistic quartile of respondents expected a 46.1 percent increase in prices between now and the end of 2026, while the most conservative quartile predicted a 9.3 percent increase in that period. Respondents anticipate a total increase of 26.4 percent by the end of 2026.

Over the past year, U.S. home prices are up a record 19.8%. You don’t need to be an economist to know that the current level of growth—which is faster than the run-up to the 2008 financial crisis—isn’t sustainable.
 
But where will this historically competitive housing market go next?
According to the latest forecast put out by Fannie Mae, median home prices are expected to rise 7.9% between the fourth quarter of 2021 and the fourth quarter of 2022. While that would mark a slowing from the extreme price growth we’ve seen this year, it would still represent strong growth by historical standards. (On average, U.S. home prices have climbed 4.1% on an annual basis since 1987.) So, put another way: The housing market, at least in the eyes of Fannie Mae, is set to return to a normal-ish level of price appreciation.
Fannie Mae also expects mortgage rates to climb next year, with the average 30-year fixed rate rising from 3.1% to 3.4%. But the downward pressure on prices from rising rates, the government-sponsored enterprise says, won’t be enough to actually pull prices down.
 
“Mortgage rates may rise in response to the tighter environment, but we expect the severe shortage of homes for sale to remain the primary driver of strong house price appreciation through at least 2022, limiting interest rate effects on home sales and home prices,” wrote Doug Duncan, chief economist at Fannie Mae, in its latest 2022 outlook.
 
As far as 2022 outlooks go, Fannie Mae’s forecast is a Goldilocks—right in the middle. On the bullish end of the spectrum are Zillow and Goldman Sachs. In the coming 12 months, Zillow foresees U.S. home prices jumping 13.6%. Meanwhile, Goldman Sachs expects home prices to swing up a staggering 16% by the end of 2022. But not everyone sees the frenzy continuing: CoreLogic, a real estate data firm, is far more bearish--forecasting just 2.2% home price growth over the coming 12 months.
All of these forecasts should, of course, be taken with a grain of salt. After all, at the onset of the pandemic—when some states had banned in-person real estate viewings--CoreLogic forecast prices would fall 1.3% between April 2020 and April 2021. For that same 12-month period, Zillow predicted home prices would fall between 2% to 3%. Not only did the housing market not slide backward, it went on one of the biggest runs in U.S. history. 
 
Existing-Home Sales Increased 7% in September From August
 
According to the National Association of Realtors®, existing-home sales increased in September after a decline the previous month. Each of the four main US areas had month-over-month growth. On a year-over-year basis, one area remained stable, while the other three showed declines in sales.

• A little improvement in supply over the preceding months aided in boosting September sales.
• Existing-home sales on a seasonally adjusted annual rate rose 7% in September from August.
• Total existing-home sales that include single-family homes, townhomes, condominiums, and co-ops, rose 7.0% from August to a seasonally adjusted annual rate of 6.29 million in September.
• However, sales decreased 2.3% from a year ago (6.44 million in September 2020).
• Home prices increased in all the regions.
• The median existing-home sales price climbed 13.3% year-over-year to $352,800.
• This marks 115 straight months of year-over-year increases.
• First-time buyers made up just 28% of sales, the lowest level since July 2015.
• The housing supply was at 1.27 million units in September, down 13% from a year earlier.
• At the current rate of sales, this equates to a 2.4-month supply.
• The median price is significantly impacted by the kind of homes presently on the market.
• The majority of activity occurs at the high end of the market since inventory is most depleted at the low end.
• Sales of houses priced between $100,000 and $250,000 decreased by 22.7% year over year.
• Sales of homes priced beyond $1 million increased by 30.5% year over year.

Thinking about selling your home in 2021? If so, you might want to consider selling it sooner rather than later.

Current housing market conditions tend to favor sellers over buyers.

Low mortgage rates have boosted demand among buyers, while low inventory conditions give sellers the upper hand. But all of this could change later in 2021. Rising home prices could cool the housing market over the coming months, especially if mortgage rates creep upward as well.

Spring and Summer 2021: a Good Time to Sell
It’s currently a strong seller’s market in most U.S. cities. But things could begin to shift toward the “center” later this year. Home prices continue to climb in most housing markets, and this could dampen demand going forward. Meanwhile, inventory growth could give buyers more options.
Right now is a great time to sell a home. But six months from now, who knows.

Here are three reasons why sellers across the U.S. might want to consider listing their homes for sale sooner rather than later:

1. Peak home selling “season” is coming.
According to several industry analysts, we are now entering the ideal time to sell a home. Peak selling “season” starts in April and runs through July.

That doesn’t mean you can’t sell a home in the fall or winter months. It just means you can probably sell your house faster, and possibly for a higher price, if you strike while the iron is hot. Postponing the sale until later in 2021, on the other hand, could make it harder to sell.

While real estate market conditions can vary from one city or region to the next, experts say that spring and early summer are the best months for selling a house in the U.S.

April 2021 housing market report from Realtor.com said that mid to late April is the absolute best time to sell a house. According to their analysis, the peak selling “season” extends through May.

To quote that report:
“When taking local market trends into account in the 50 largest U.S. metros, the best week to list varies by locale throughout March, April and May.”

So that’s the first consideration for those planning to sell a home in 2021. If you’re looking to sell as quickly as possible, you might consider listing it sometime within the next three months. Sellers who go on the market during the spring and early summer could potentially sell their homes for more money, compared to those who wait until fall or winter.

2. Low inventory conditions currently favor sellers.
Here’s something home buyers probably don’t want to hear right now. In most cities across the U.S., low inventory conditions have created a strong seller’s market. Tight supply conditions and strong demand have shifted the real estate market in favor of sellers.

But it won’t be like this forever. In fact, there’s a strong chance that inventory levels will increase throughout the rest of this year, as more properties come onto the market.

For now, however, housing market supply remains very low in most U.S. cities. This is another trend that favors sellers. Those who sell a home within the first half of 2021 will directly benefit from the ongoing supply shortage.

According to a recent report from Realtor.com, the number of homes for sale nationwide dropped by -52% from March 2020 to March 2021. That’s a major reduction in supply. It translates to 534,000 fewer homes for sale in March of this year, compared to a year ago.

Related: Housing market shrinks by half
Some metro areas experienced an even bigger drop in inventory, over the past year or so. The number of homes for sale in Austin, Texas fell by -72.7% during the 12-month timeframe mentioned above. Jacksonville, Florida and Raleigh, North Carolina also experienced inventory declines greater than 70%.

In these (and many other) housing markets across the country, selling a home has never been easier. Forget about painting, staging and landscaping. Just list the home, and then wait for the offers to pour in. Record-low inventory has home buyers lining up to make an offer. And in many cases, they’re willing to offer more than the list price.

But we’re starting to see some improvement on the inventory front. It seems that more and more sellers are starting to list their homes for sale. This could shift the inventory situation, as we move into the latter part of 2021. If this trend continues, sellers might have to work a little harder to find the right buyer.

3. Rising prices and mortgage rates could cool the market.
Record-low mortgage rates have helped fuel the housing market over the past year or so. Home sales remained strong throughout most of 2020, despite the coronavirus pandemic and resulting economic slowdown. And low mortgage rates were one of the primary factors driving that trend.

During the first week of January 2021, the average rate for a 30-year fixed mortgage loan fell to a record low 2.65%. That was the lowest average in 50 years of record-keeping.

But mortgage rates have risen since then. They rose steadily from February to March of this year, topping out at 3.18% by the beginning of April. In mid-April, 30-year mortgage rates dropped back down to around 3.04% (on average). There has been a recent uptick in rates

We are currently seeing more volatility with mortgage rates, compared to the steady decline that occurred through 2020 in early 2021. Some forecasters, including the Mortgage Bankers Association and Freddie Mac, expect to see higher rates toward the end of this year and into 2022. This could have a cooling effect on the housing market, making it harder to sell a home.

Rising home prices also play a role here — and arguably a bigger one.

In most cities across the country, home prices rose steadily over the past 18 months. Not even a global pandemic could stop U.S. house prices from climbing. This is another important consideration for those planning to sell a home in 2021. As house values rise, it reduces the number of people who can afford to buy. It can shrink the pool of qualified buyers and cool the housing market.

According to Zillow, the median home price in the U.S. rose by around 10% over the past year (as of April 2021). Looking forward, the company’s research team expects prices to continue climbing.
In mid-April, the company’s website stated:
“United States home values have gone up 9.9% over the past year and Zillow predicts they will rise 11.4% in the next year.”
If home prices and mortgage rates climb over the coming months, it could create a “double whammy” effect that slows the housing market. Higher interest rates and house prices could squeeze many buyers out of the market. Something to consider, if you plan to sell your home in 2021.

Bottom Line: Seller’s Market Won’t Last Forever
To summarize, real estate conditions within many U.S. cities could change as we progress through 2021 and into 2022. Recent trends suggest that more sellers are now listing their homes for sale, and that could continue over the coming months.
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At the same time, steadily rising prices could reduce the pool of eligible home buyers. Higher mortgage rates could compound this effect. Both of these factors — but especially home prices — could reduce buyer demand as we move further into 2021.

It’s currently a great time to sell a house, in most U.S. cities. Supply is low and demand is high. We also happen to be entering the peak selling season, based on data from previous years. But we don’t know how long the party will last, for sellers.

The coronavirus pandemic has remade what's normal, and homebuying is no exception. Typically, the real estate market tends to hit the brakes in the fall, as kids return to school and families juggle work, extracurriculars and the upcoming holidays.

But that's not what's happening as we head into the second week of September, closing in on the official start of fall: Sept. 22. Homes are getting snapped up faster as home values rise and mortgage rates continue to slide.
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Home sales are currently stronger than they were pre-pandemic and show no signs of slowing. Demand is being fueled by low mortgage rates. We're also seeing deferred home buying as the economy and housing market pressed pause in the spring.
 
The median listing price on single-family homes grew for the 17th straight week, jumping 10.8% year-over-year, which is the most rapid growth in over two years. Meanwhile, mortgage rates have broken new records. The average rate on the 30-year fixed-rate mortgage is now at 2.86%, and the 15-year hit 2.37% this week-both all-time lows, according to Freddie Mac's recent Primary Mortgage Market Survey.

As the number of homes for sale continues to shrink, new listings are being snapped up quickly. They're lasting 12 fewer days on the market than they were 12 months ago, according to Realtor.com's latest housing trends report.

"With unusually high buyer interest this late in the homebuying season, buyers are moving much faster than this time last year to beat out competition and lock in low mortgage rates. This means homes are sitting on the market for much less time, despite notably higher price tags," the report's author, Realtor.com economist Danielle Hale, wrote.

Whether this buying trend will continue is up in the air as supply is lagging behind demand, which appears to be the only real obstacle. What's holding home buying back now are chronically low levels of inventory, Johnson says, and stiff competition for homes that do come onto the market.

New listings dropped 12% during the week ending on Sept. 5, which spells trouble if construction doesn't pick up. This is especially harmful for first-time buyers who are competing against a slew of bids for the same listing.
"Multiple offers are quite common for starter homes," says Lawrence Yun, chief economist at the National Association of Realtors (NAR).
 
Why is Homebuying taking off so much right now?
 
Experts can't point to one reason why homebuying has defied expectations as we face a still uncertain economy and elevated levels of unemployment. Certainly, the Federal Reserve and GSEs, Fannie Mae and Freddie Mac, helped keep the market liquid so lenders could continue to do business as well as contain mortgage rates. But why is there such a big appetite for real estate now?

Low mortgage rates? People fleeing cities? The need for more space as working from home and remote learning become realities? Dormant buyers who were waiting for the pandemic to subside? It's likely a combination of a few or all of these factors.

Homebuying is currently on a tear, but much of this is likely due to the fact that those looking to buy during the spring homebuying season had to wait as the pandemic took hold.

One influence that is undeniable in the recent buying spree is the rise of the ultra-low mortgage rate, says Yun of NAR.
 
Buyers who were held back from buying during the spring watched mortgage rates drop. Now that businesses are opening up and more people are finding ways to live with the coronavirus safely, the homebuying hesitancy has subsided. Low rates are just adding extra impetus to what was already a motivated buying segment.

"Low rates are the key reason for the robust homebuying, despite the still-high unemployment rate," Yun says. "Those with secure employment are taking advantage of the low interest rates."

The circumstances surrounding the pandemic have created homebuyers, as well, says Bill Cosgrove, president and CEO of Union Home Mortgage. People are using their kitchens for office space and spare bedrooms for classrooms, so many of them are looking to upsize.

Not only do they want more square footage, but they want to get away from urban cores so they can also have outdoor space.

"Our understanding of what 'home' needs to be has really expanded in 2020 and it's happening with homebuyers of all types," Cosgrove says.

How has the Pandemic shaped the real estate market?

Real estate experts agree the coronavirus has changed what people are looking for in a home-but to what extent is up for debate. For example, are people really abandoning New York and other major cities? At least, enough to call it a "trend."

Headlines have suggested that people are leaving dense urban centers like New York to buy houses in the suburbs where land is plentiful and their neighbors are not within six feet. However, even with increased interest in places like upstate New York post-COVID, there's still not enough data to identify a meaningful pattern.

Zillow examined whether or not there was a shift in where people want to live, especially in terms of cities and suburbs as more people spend time working and learning from home.

"After analyzing a slew of housing market data, we have not seen suburban markets strengthen compared to urban ones, nor an increase in search activity for single-family detached homes," Young says.

New York-based real estate broker at Warburg Realty, Tania Isacoff Friedland, says that her clients have expressed interest in more space, but they're not necessarily leaving the city. Many want to trade in their penthouse for a townhouse, rather than ditch their Manhattan ZIP code for something pastoral.

"There have been many stories about an urban exodus, but my clients have been bullish about the future of New York City and are still investing here," Isacoff Friedland says.

Regardless of where you live, extra space is commanding buyer interest. The prospect of permanently working from home and schools requiring remote learning has caused homebuyers to reevaluate how much room they need. Even after the coronavirus is contained, there will still be people who continue to work from home, Yun says.

Additional considerations like multigenerational living (wherein extended family moves in), as well as using the home as a recreational space, have driven interest in the "destination home," says Cosgrove of Union Home Mortgage.

The "destination home" is a one-stop-shop for homeowners who face more at-home time and it might include space for outdoor activities, social gatherings, work and privacy.
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"The COVID-19 pandemic has forced all of us to spend a lot more time in our homes more than ever before. The destination home is a place where family and friends can gather compared to going out," Cosgrove says.