Housing Market Forecast 2022: Will It Crash or Boom in 2022

                                            By Marco Santarelli

Mortgage rates at record lows and a lack of available inventory are sustaining the US housing market’s demand. 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. However, will the housing market ever crash? Let’s look at the most recent trends in 2021 and housing market predictions for 2022.

In 2020, the number of home sales increased significantly and surpassed 2007 levels. Despite the economic uncertainty caused by the pandemic, many buyers took a more serious approach to homeownership than ever before. It resulted in a massive, but brief, increase in homeownership as a result of drastically reduced spending. The housing market has been particularly robust this year, with high demand for homes in almost every area of the nation. As of October, realtors are now forecasting full-year sales of more than 6 million, the highest number of sales since 2006.

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.

The Census Bureau has released its most recent quarterly report, which includes data through the third quarter of 2021. Seasonally adjusted, the homeownership rate for Q3 is 65.4 percent, down from 65.4 percent in Q2. Additionally, the nonseasonally adjusted Q2 figure is 65.4 percent, which is unchanged from the Q2 2021 figure.

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.

We’ll examine current real estate trends, including price and rent increases, housing sales and supply, mortgage rates and delinquencies, and other key industry takeaways and insights into the US housing market.

Housing Market Predictions 2022: Crash?
Home price rise in the United States will “moderate” or slow in 2022. 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.

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 the sectors, mortgage rates are rising, and jobs are also recovering. As of now, low mortgage rates are providing opportunities for buyers to lock in low monthly mortgage payments for future years.

In November 2021, the housing market is demonstrating signs of rebalancing, as evidenced by a steady pace of transactions and more moderate price growth. As more homeowners list their homes for sale, these homes remain on the market for longer periods of time. Despite this, buyers must be prepared to act quickly, even if they get a few additional days to decide. While the housing market remains largely a seller’s market due to demand still outpacing supply, it is clear that things are changing. More homes are coming on the market, and the number of bidding wars has decreased significantly.

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. The latest housing news has Zillow revising its 2022 real estate forecast. They released a bullish 2022 forecast in September, predicting that home prices in the United States would rise another 11.7 percent over the next 12 months.

However, the real estate listing site now claims that their previous forecast was too pessimistic. They published a new report predicting that home prices in the United States will increase 13.6 percent between October 2021 and October 2022, and to end 2021 up 19.5% from December 2020.

While Zillow’s forecast is bullish, it is also a bit of an outlier when compared to CoreLogic’s forecast for a 2.2 percent increase in US home prices. On the other hand, Freddie Mac’s forecast is more bullish than Zillow’s. The FMHPI is an indicator for typical house price inflation in the United States. It indicated that home prices increased by 11.3 percent in the United States in 2020 as a result of robust housing demand and record low mortgage rates.

According to their housing market forecast, house value growth in 2022 will be less than half of what we’ve witnessed so far this year. 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. Growth is expected to slow to 7 percent in 2022, according to their latest forecast.

The pace of home sales has cooled since the first quarter of 2021 when it was at 7.2 million. Freddie Mac predicts home sales to hit 6.8 million for the full years 2021 and 2022. Additionally, they forecast house price growth of 16.9% in 2021. However, they expect house price growth to slow to 7.0% in 2022.

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, they anticipate refinancing activity to soften, with refinancing originations declining from $2.6 trillion in 2021 to just below $1.0 trillion in 2022. Overall, Freddie Mac predicts that total originations will decline from $4.5 trillion in 2021 to $3.1 trillion in 2022.

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. 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.

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.

According to Zillow, the housing market forecast for 2022 has improved but lingering economic uncertainty may temper some of the predictions. 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.

The pandemic also pushed the buying season further back in the year, adding to recent sales. Future sources of economic uncertainty, including lapsed fiscal relief, the long-term fate of policies supporting the rental and mortgage market, and virus-specific factors, were incorporated into this outlook.