To borrow from the lexicon of basketball announcer Dick Vitale: If you’re looking for clarity on where the national real-estate market is headed in 2022, you’ve come to the wrong place, baby!
There were about 6.3 million homes sold nationally from January through November of 2021, the most sales in that time period since 2006. Of those, roughly 5.61 million were existing homes. When asked whether sales will rise or fall in 2022 compared to 2021, 41 percent of participants in the latest Zillow Home Price Expectations Survey (ZHPES) said sales will grow, an equal number predicted a slowdown, and the remaining 18 percent thought sales would remain the same.
Glad to clear that up for you!
Zillow’s own forecast calls for sales of existing homes to increase a bit in 2022, drawing on recent sales performance, household-formation rates and the expectation that mortgage rates will remain relatively low, offering attractive financing for home buyers.
“In America’s frenzied pandemic-era housing market, buyers and sellers have both defied expectations: Buyers have forged on in the face of record-fast price appreciation, and homeowners have steadfastly demurred from cashing in on this selling opportunity,” said Jeff Tucker, a senior economist at Zillow.
“The outlook for home sales in 2022 hinges on which side yields first,” he said. “If buyers finally balk at unaffordable prices, sales volumes could fall. But if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of appreciation. Our expert survey panel was split right down the middle on which scenario to expect.”
Panelists who foresee lower sales in 2022 point to financial strains on buyers as the main driving factors. Worsening home affordability was cited by 54 percent of respondents as the most important reason for a sales decline, while higher mortgage rates were noted by 28 percent. As home values skyrocketed in 2021 – up a record 19.3 percent year-over-year in November – affordability saw its greatest decline since at least 2014.
Among those panelists who anticipate an uptick in sales, additional inventory is overwhelmingly cited as the key; 51 percent said an increase in existing homes listed for sale will be the most important factor, while 21 percent pointed to more new homes being completed and listed for sale.
Inventory began to recover through the summer of 2021, but lost ground in the fall.
Over the past two years, home-value growth in many large metros has been higher in areas with longer commutes to the downtown core, a reversal of past trends. Most ZHPES panelists believe these trends will continue in 2022, with 46 percent expecting growth rates in downtown to slow more than those farther out, compared to 34 percent who believe downtown values will rise faster than those in suburban areas.
Faith that the shift to working from home is becoming more permanent and pronounced was the top reason behind respondents’ confidence in the suburbs. A demographic shift scored second, as a growing wave of young people form families and move to larger homes. Pandemic-related health concerns for dense living conditions and a loss of urban amenities due to COVID-19 were rated the least impactful.
Although every respondent in this latest survey expects nationwide home-price appreciation to slow in 2022 from last year’s record-breaking pace, the average of their long-term projections remains among the most bullish outlooks for home values in ZHPES history. On average, panelists expect home values to grow another 6.6 percent this year, and by 23.5 percent over the coming five years.
“Although a handful of experts foresee a modest price correction on the horizon, none expect a crash, even as the confluence of unusual forces impacting U.S. housing markets continues to generate significant uncertainty,” said Pulsenomics founder Terry Loebs.
Loebs said the range of home-price predictions from panel participants is the widest he’s ever seen. The most optimistic group of experts expects more than 37 percent cumulative home-value appreciation through 2026, while the most pessimistic group expects a gain of less than 8 percent over the same period.
This edition of the Zillow Home Price Expectations Survey surveyed 106 housing market experts and economists in the second half of November to gather their predictions for the outlook of the housing market in 2022 and beyond. The survey was conducted by Pulsenomics LLC on behalf of Zillow.