Housing Market Outlook in 2022


Housing Market Outlook in 2022

After two years of explosive growth in the US housing market, will there be a slowdown and perhaps a drop in sales and prices in 2022, along with some things returning to normal?

Lawrence Yun, Chief Economist at Amnesty International, said: "Home sales are likely to decline slightly in 2022 from the expected rise in mortgage rates. At the same time, home prices will continue to rise due to the persistent housing shortage even with slightly lower demand. "—the National Association of Realtors (NAR), which oversees the NAR research group.

"After seeing such excessive growth, I don't think we will see a correction, perhaps a slowdown," said Andres Bergeron, head of brokerage operations at Awning.com, a real estate technology company.

Ryan McLaughlin, CEO of the Northern Virginia Association of Realtors (NVAR), also expects a price drop. "I don't see any collapse in the immediate future impossible."

Their comments come after one of the hottest and craziest stretches in real estate driven by the pandemic has fueled demand for large homes as more Americans work from home. Feverish buying has also been driven by historically low mortgage rates and millennials (up to 45 million, according to Realtor.com) trying to buy their first home.

Last year, the current median single-family home price jumped to an all-time high of $357,900, up 23% from the previous year, according to NAR. The organization said about 94% of the 183 metropolitan areas measured had double-digit gains, up from 89% of the prior year.

Experts say the market will remain vital for home sales this year, but it will be closer to normal levels. NAR forecasts average price gains by the end of 2022 at between 5% and 7%. But buyers will also have to deal with higher inflation which could push prices higher and slightly higher interest rates.

Mortgage rates will rise this year after hitting historic lows during the pandemic, Yoon said, but not by much. NAR thinks it will be around 3.7%, compared to 3.4% currently. This is still a historical low.

Although home sales are likely to decline by about 2% in 2022, Yoon still expects sales to exceed pre-pandemic levels. NAR expects average annual home prices to rise 5.7% in 2022.

Yoon also believes that there are still 5.5 to 6.8 million housing units that need to be built to meet market demand for homes.

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This could mean areas like the South will continue to be a hotbed of homeownership due to oversupply, said Robert Dietz, chief economist at the National Association of Home Builders (NAHB).

He said the area, including hotspots in Texas Austin, Dallas-Forth Worth, and Houston, would continue for more than half of single-family homes built in the United States.

It coincides with NAR identifying ten housing markets as "hidden gems" to look out for this year. Besides Dallas-Fort Worth, other metro areas include Daphne-Fairhope-Farley and Huntsville, Ala.; Fayetteville-Springdale-Rogers on the Arkansas-Missouri border; Knoxville, Tenn; Palm Bay-Melbourne-Titusville, and Pensacola-Ferry Pass-Brent, Florida; San Antonio - New Braunfels, Texas; Spartanburg, South Carolina; & Tucson, Ariz.

"Cause and consequence are happening because these markets attract companies, and it is easier to develop commercial real estate and new homes," Dietz said, citing Tesla CEO Elon Musk's recent announcement of moving his company's headquarters from the San Francisco Bay Area to Austin.

McLaughlin cites a similar situation created by Amazon's soon-to-be new headquarters in Arlington, Virginia, that will attract new homeowners in a market where the average price of homes sold in the NVAR region peaked near $750,000 in October. He said in November that sales in his region had topped $17 billion, up 25% from 2020 sales at the time.

Dietz said that other southern regions, including Charlotte, Nashville, Tampa, and Orlando, Florida, are also in high demand.

NAR's Yoon said the South is one area likely to see an increase in sales in 2022 due to baby boomers retiring and moving to southern states for affordability and warmer weather.

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