Housing Market Predictions 2022 to 2025: Crash vs Boom!

                                          By Marco Santarelli

Let’s take a look at some of the most talked-about housing market predictions for 2022 & 2023. In light of what real estate professionals are forecasting, here are some educated predictions about what the future of the United States housing market will look like. Despite historically low borrowing rates, the housing industry has had a boom last year, with the largest annual gain in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years.

One can easily predict 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 current 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? Is the housing market ascending or is it 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 and will it crash? The simple answer is that it will not crash in 2022. 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 of 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.

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. Around mid-April, it surged to 5.28 percent, the highest level since April 2010, and the uptick continues.

Monthly affordability will suffer as interest rates rise, but we’ll also lose more of the investment-type buyers looking for once-in-a-lifetime leverage. As a result, rising interest rates may also imply a more stable market. With rates that low in 2021, all kinds of buyers rushed in, and with little housing supply to match, price rise has been ferocious. This also emphasizes affordability. The basics of housing needs would still continue to drive primary purchases forward. It’s a good thing that the housing market will be less heated in 2022 and 2023. Let’s take a closer look at why the housing market is showing some signs of a slowdown in 2022 & beyond.

emic subsided, we saw an increase in demand for apartments in the city after many returned to New York – and residents felt more comfortable with city living again.

2022 is expected to be even more robust for the city’s residential and commercial real estate.

Platinum Properties CEO, Khashy Eyn, sat down to discuss the state of the market and his predictions for 2022:

What does the market look like for renters early next year?

I have a very positive outlook for the rental market early next year.

Renting apartments is all about supply and demand. During the pandemic, many New Yorkers moved out of the city, prices dropped and those who were originally priced out of Manhattan were able to scoop up rentals at historically discounted rates. When prospective renters caught on to this, everybody wanted to move to Manhattan which drove inventory down.

Inventory is still expected to remain low in 2022, due to an increase in demand and competition, especially with the anticipation of major conglomerates like Amazon, ESPN, TikTok and Disney opening up new offices and bringing more jobs to the city – all of those employees will need to find a place to live.

For those being priced out, there may be hope: we could see some inventory coming up as the 18-month leases expire – but those will be scooped up quickly so you’ll need to act fast.

Why aren’t builders building rental properties when they are in high demand?

Developers aren’t investing in building rentals right now because of the high costs to build.

The current high cost of land and the high cost to build doesn’t bring a huge return for rental developments, which is why developers are shying away from adding more rental properties to the city landscape right now.

There may be some existing office spaces being converted to residential properties next year, which could allow for a quick uptick in inventory that renters should jump on.

How does the market look for buyers next year?

I don’t see prices increasing as significantly for buyers next year, but I believe that the inventory we have is going to get absorbed rapidly again due to those new jobs being created by these high-tech firms offering big salaries.

Where should buyers look to get an affordable property before price hikes?

The Financial District is still relatively very inexpensive compared to the rest of the market. A lot is happening down here especially with the Seaport improving.

However, all of the traditional markets like Brooklyn, or even in parts of New Jersey where some commuters would go for cheaper properties are now more expensive than ever. Rising prices aren’t just a New York City problem, it’s happening all over the Tri-State Area.

So, landlords can potentially get a lot of money for the units they are renting, right?

It’s definitely a landlord’s market.

The landlords went through a very tough time during COVID, they offered major concessions when COVID hit. Now that demand is higher, those concessions are fading and rents are trending toward “normal” pre-COVID prices again.

That doesn’t mean concessions are completely gone – I think you will see concessions in rentals here and there. If there is a new development going up or a new building, they are going to offer concessions, but not as drastic as during COVID.

Is now the right time for sellers to take advantage of this market climate?

I don’t see prices coming down anytime soon. As inventory decreases, sellers have the power. If someone is thinking about selling, now’s the time.

How do you think the recent bump in inflation has affected the market?

I think the drastic rise in inflation is a problem, but I don’t think we are going to see that problem truly affect the market for another couple of years. Inflation is real – the cost of goods is going up significantly. Luxury assets are extremely expensive but right now everyone is still buying. There is a big supply problem, but once the supply is back to normalcy, you might see prices stabilize.

What would you say to anyone in 2021 who said New York is dead, or New York has changed?

New York has come back better and stronger than ever and will continue to be the number one city in the world. I think that for every restaurant you saw close, you will see two more open next year. I think a lot of restaurants will also be opening ghost kitchens because the startup cost is almost zero.

How can Platinum Properties help renters, buyers, sellers and landlords next year?

At Platinum, we have the tools, staff and resources to help any client on their real estate journey. 2021 was an amazing year for the brokerage. We did outstanding work with residential sales, helping thousands of clients and even set records in the residential leasing space.

At Platinum, we are nimble, creative and committed to our clients, we operate without needless layers. Instead, we invest more in our people, our marketing, and our tech, so we are primed to create opportunities.

We know that true innovation comes from the diversity of thought, and we hire to ensure a wide range of experiences, knowledge, and perspectives.

This collaboration strengthens us, both as individuals and as partners, making us smarter and more successful. When our clients succeed, we succeed.