Expert Forecast: Predictions for the Rest of the 2022 Real Estate Market
Rarely have rising interest rates been seen as a good thing in real estate circles. But in the current seller's market, higher mortgage financing rates are viewed as a potential solution to runaway price appreciation in many markets across the country. However, few experts believe that rate increases will substantially reduce the current demand, nor can higher rates be expected to affect sales numbers to any great extent, at least for the second half of this year.
Higher prices and an increasingly short supply of homes have caused some buyers to be effectively priced out of the market. The existing increase in rental prices only serves to accentuate the problem. Viewed as a wise move by the Fed, real estate experts hope that higher interest rates will help balance demand and regulate prices in the coming months. Real estate professionals and potential buyers and sellers alike will certainly be watching with bated breath.
Rates have risen more quickly than predicted, which is a sign that affordability will continue to be diminished because supply cannot keep up with current demand. However, real estate predictions do not anticipate a meltdown, nor do forecasters anticipate that a crash is on the horizon.
Statistics Tell the Story
New construction has not yet completely recovered from the Great Recession due to a diminished labor pool and the inflated cost of materials. The past two years of the pandemic also influenced the housing market. Now, all indications are that the availability of housing -- both new builds and new listings -- will increase during the remainder of 2022. Still, that demand will almost certainly outpace supply not only this year but into 2023 as well. It may continue beyond next year.
Let's look at past statistics:
According to the February 2022 Monthly Housing Market Trends Report by Realtor.com, the median listing price for active listings was $392,000, representing a 12.9% increase compared to 2021 and up 26.6% from February 2020. By most measures, 2021 was a banner year for home sales.
The number of homes on the market declined by almost 180,000 in 2021, and total inventory decreased by nearly 27% compared to 2020.
Today, leading real estate forecasters, notably Zillow, have issued new estimates for 2022, noting that the 16.4% projected growth rate may have been high. Zillow's latest prediction is for a 14.9% growth rate, with 6.09 million sales, down only one-half percentage point from 2021.
Key factors -- Low inventory, quick sales, and rising prices -- are all cited by leading analysts, and the expectation is that all will continue at least until 2023.