Home sales and home prices likely will moderate from recent highs in the new year, but economists expect the hot housing market to continue nonetheless.
A competitive seller’s market is likely to stick around in 2022, but economists believe buyers may see better opportunities. Still, housing affordability challenges will persist, they say.
“Americans are poised for a whirlwind year of home buying in 2022,” says Danielle Hale, realtor.com®’s chief economist. “With more sellers expected to enter the market as buyer competition remains fierce, we anticipate strong home sales growth. Affordability will increasingly be a challenge as interest rates and prices rise, but remote work may expand search areas and enable younger buyers to find their first homes sooner than they might have otherwise.”
Realtor.com® released its 2022 housing forecast, including noting some of the following trends expected for the new year:
1. Suburbs are still the place to be: The pandemic continues to modify what Americans look for in a home. One in five homeowners looking to sell and move no longer need to live near their office. That is giving them the flexibility to move further out, allowing them to target the suburbs. Read more: Suburbs Remain Popular, Even as Cities Stage Comeback
2. Millennials are eager to finally move: Forty-five million millennials are in a “homebuyer sweet spot,” realtor.com® says. That many of them will fall within the prime first-time homebuying ages of 26 to 35 in 2022.
3. Hispanic home buyers rise: Hispanics comprise a larger share of the market, accounting for more than one out of 10 recent home buyers. “With a growing share of the population and the potential for a rising homeownership rate, this demographic group is expected to play a growing role in the home buying market,” Hale says.
4. Affordability challenges remain: Home prices, rents, and mortgage rates are all expected to be on the rise in 2022. The 30-year fixed-rate mortgage is expected to average between 3.5% to 3.6% by the end of 2022. However, Lawrence Yun, chief economist of the National Association of REALTORS®, also recently said that home prices likely will increase at a “gentler pace” over the next several months as mortgage rates increase.
5. More homes come on the market: Realtor.com® predicts a 6.6% increase in housing inventory in 2022, a welcome sign to buyers who have complained of few listings over the past year. An increasing share of homeowners this fall reported planning to sell a home over the next 12 months, realtor.com® says. Yun also pointed recently to hopeful signs of more inventory in 2022 during a presentation at last month’s REALTOR® Conference & Expo. Yun said new supply will also partly come from new housing construction, which is already underway, as well as the conclusion of the mortgage forbearance program that will likely cause a number of homeowners to sell. “With more housing inventory to hit the market, the intense multiple offers will start to ease,” Yun said. “Home prices will continue to rise but at a slower pace.”