What’s in Store for the 2022 Real Estate Market?
What’s in store for the 2022 real estate market? NAR asked 20 experts
Expect slower housing price appreciation, easing inflation, and rising interest rates in 2022, according to a survey of more than 20 top U.S. economic and housing experts by the National Association of Realtors® (NAR).
Lawrence Yun, NAR chief economist and senior vice president of research, unveiled the consensus forecast during NAR’s third annual year-end Real Estate Forecast Summit.
For 2022, the group of experts predicted that annual median home prices will increase by 5.7%, inflation will rise 4% and the Federal Open Market Committee will twice increase the federal funds rate by 0.25%. However, that prediction may already come up a bit short, since the Fed announced on Wednesday that it will likely raise interest rates three times next year.
“Overall, survey participants believe we’ll see the housing market and broader economy normalize next year,” Yun said. “Though forecasted to rise 4%, inflation will decelerate after hefty gains in 2021, while home price increases are also expected to ease with an annual appreciation of less than 6%. Slowing price growth will partly be the consequence of interest rate hikes by the Federal Reserve.”
Mortgage rates have an imperfect relationship with interest-rate hikes, which tend to directly impact short-term credit, such as credit cards and adjustable-rate mortgages (ARMs). However, Fed boosts to interest rates do have a tendency to move rates higher on longer-term loans, such as 30-year mortgages.
Yun forecasts that U.S. GDP (growth domestic product) will grow at the typical historical pace of 2.5%, barring any major, widespread transmission of the omicron COVID-19 variant. He expects the 30-year fixed mortgage rate to increase to 3.5% as the Fed raises interest rates to control inflation but noted this is lower than the pre-pandemic rate of 4%.
Looking back at the housing market this year, Yun says it performed better than it has in 15 years, with an estimated 6 million existing-home sales. As mortgage rates tick up slightly, Yun predicts that existing-home sales will decline to 5.9 million in 2022. He also forecasts a modest increase in housing starts to 1.67 million as the new-home industry sees some relief from supply-chain backlogs.
At the economic summit, NAR also identified “Top 10 Housing Market ‘Hidden Gems’” – areas expected to see outsized price growth in 2022.
Two of those “hidden gems” are in Florida: Palm Bay-Melbourne-Titusville and Pensacola-Ferry Pass-Brent.
“The housing sector performed spectacularly in 2021 in many markets, with huge gains achieved in places like Austin, Boise and Naples,” Yun said. “Several markets did reasonably well in 2021, but not as strong as the underlying fundamentals suggested. Therefore, in 2022, these ‘hidden gem’ markets have more room for growth.”
Source: “What Does 2022 Hold? NAR Asked 20 Experts,” Florida Realtors