If you’re thinking of buying a home in today’s housing market, you may be wondering how strong your investment will be. You might be asking yourself: if I buy a home now, will it lose value? Or will it continue to appreciate going forward? The good news is, according to the experts, home prices are not projected to decline. Here’s why.
With buyers still outweighing sellers, home prices are forecast to continue climbing in 2022, just at a slower or more moderate pace. Why the continued increase? It’s the simple law of supply and demand. When there are fewer items on the market than there are buyers, the competition for that item makes prices naturally rise.
And while the number of homes for sale today is expected to improve with more sellers getting ready to list their houses this winter, we’re certainly not out of the inventory woods yet. Thus, the projections show continued appreciation, but at a more moderate rate than what we’ve seen over the past year.
Here’s a look at the latest 2022 expert forecasts on home price appreciation:
What’s the biggest takeaway from this graph? None of the major experts are projecting depreciation in 2022. They’re all showing an increase in home prices next year.
And here’s what some of the industry’s experts say about how that will play out in the housing market next year:
Brad Hunter of Hunter Housing Economics explains:
“. . . the recent unsustainable rate of home price appreciation will slow sharply. . . . home prices will not decline. . . but they will simply rise at a more sustainable pace.”
Danielle Hale from realtor.com agrees:
“Price growth is expected to move back toward a normal range, but this is on top of recent high prices, . . . So prices will [still] hit new highs. . . . The pace of price growth is going to slow notably . . . ”
While home price appreciation is expected to continue, it isn’t projected to be the record-breaking 18 to almost 20% increase the market saw over the past 12 months. Overall, it’s important to note that price increases won’t be as monumental as they were in 2021 – but they certainly won’t decline anytime soon.
With motivated buyers in the market and so few homes available to purchase, the imbalance of supply and demand will continue to put upward pressure on home prices in 2022. And when home price appreciation is in the forecast, that’s a clear indication your investment in homeownership is a sound one.
It’s important to know that home prices are not projected to decline in the new year. Instead, they’re forecast to rise, just at more moderate pace. That’s why it’s mission-critical to work with a trusted advisor to make sure you’re up to date on what’s happening with home price appreciation in your market, so you can make an informed decision about your next move.
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Like most industries, residential real estate has a seasonality to it. For example, toy stores sell more toys in October, November, and December than they do in any other three-month span throughout the year. More cars are sold in the U.S. during the second quarter (April, May, and June) than in any other quarter of the year.
Real estate is very similar. The number of homes sold in the spring is almost always much greater than at any other time of the year. It’s even labeled as the spring buying season. Historically, the number of buyers and listings for sale significantly increase in the spring and remains strong throughout the summer. Once fall sets in, the number of buyers and sellers typically drops off.
Last year, however, that seasonality didn’t happen. The outbreak of the virus and subsequent slowing of the economy limited sales during the spring market. These sales were pushed back later in the year, and last fall and winter saw a dramatic increase in home sales over previous years. The only thing that held the market back was the extremely limited supply of homes for sale.
Some experts thought we’d return to the industry’s normal seasonality this winter with both the number of purchasers and houses available for sale falling off. However, data now shows that neither of those situations will likely occur. Buyer demand is still extremely strong, and it appears we may soon see a somewhat uncharacteristic increase in the number of homes coming to the market.
The latest Showing Index from ShowingTime, which tracks the average number of monthly showings on available homes, indicates buyer activity was slightly lower than at the same time last year but much higher than any of the three previous years (see chart below):
A report from realtor.com confirms buying activity remains strong in the existing home sales market:
“New housing data shows 2021’s feverish home sales pace broke a yearly record in October, . . . with last month marking the eighth straight month of buyers snatching up homes more quickly than the fastest pace in previous years. . . .”
Buyer activity for newly constructed homes is also very strong. Ali Wolf, Chief Economist for Zonda, recently reported that Stuart Miller, the Executive Chairman of Lennar, one of the nation’s largest home builders, said this about demand:
“There is still a great deal of demand at our sales centers with people lining up and not enough supply.”
The only question heading into this winter is whether the number of listings available could come close to meeting this buyer demand. We may have just received the answer to that question.
Instead of waiting for the normal spring buying market, new research indicates that homeowners thinking about selling are about to put their homes on the market this winter.
Speaking to the release of a report on this recent research, George Ratiu, Manager of Economic Research for realtor.com, said:
“The pandemic has delayed plans for many Americans, and homeowners looking to move on to the next stage of life are no exception. Recent survey data suggests the majority of prospective sellers are actively preparing to enter the market this winter.”
Here are some highlights in the report:
Of homeowners planning to enter the market in the next year:
The report also discusses the reasons sellers want to move:
Data shows buyer demand remains unusually strong going into this winter. Research indicates the supply of inventory is about to increase. This could be a winter real estate market like never before.
If you’re thinking of buying or selling, now is the time to have a heart-to-heart conversation with a real estate professional in your market, as things are about to change in an unexpected way.
Many people have questions about home prices right now. How much have prices risen over the past 12 months? What’s happening with home values right now? What’s projected for next year? Here’s a look at the answers to all three of these questions.
According to the latest Home Price Index from CoreLogic, home values have increased by 18.1% compared to this time last year. Additionally, prices have gone up at an accelerated pace for each of the last eight months (see graph below):
The increase in the rate of appreciation that’s shown by CoreLogic coincides with data from the other two main home price indices: the FHFA Home Price Index and the S&P Case Shiller Index.
The last year has shown tremendous home price appreciation, which is resulting in a major gain in wealth for homeowners through rising equity.
All three indices mentioned above also show that while appreciation is in the high double digits right now, that price acceleration is beginning to level off (see graph below):
Year-over-year appreciation is still close to 20%, but it’s clearly plateauing at that rate. Many experts believe it will drop below 15% by the end of the year.
Keep in mind, that doesn’t mean home values will depreciate. It means the rate of appreciation will slow, yet stay well above the 25-year average of 5.1%.
The recent surge in prices is the result of heavy buyer demand and a shortage of homes available for sale. Most experts believe that as more housing inventory comes to market (both new construction and existing homes), the supply and demand for housing will come more into balance. That balance will bring a lower rate of appreciation in 2022. Here’s a look at home price forecasts from six major entities, and they all project future appreciation:
While the projected rate of appreciation varies among the experts, due to things like supply chain challenges, virus variants, and more, it’s clear that home values will continue to appreciate next year.
There have been historic levels of home price appreciation over the last year. That pace will slow as we finish 2021 and enter into 2022. Prices will still rise in value, just at a much more moderate pace, which is good news for the housing market.
With mortgage rates climbing above 3% for the first time in months, serious buyers are more motivated than ever to find a home before the end of the year. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), puts it best, saying:
“Housing demand remains strong as buyers likely want to secure a home before mortgage rates increase even further next year.”
But the sense of urgency they feel is complicated by the lack of homes for sale in today’s market. According to the latest Existing Home Sales Report from NAR:
“From one year ago, the inventory of unsold homes decreased 13%. . . .”
With buyers eager to purchase but so few homes available, sellers who list their houses this fall have a tremendous advantage – also known as leverage – when negotiating with buyers. That’s because, in today’s market, buyers want three things:
These three buyer needs give homeowners a leg up when selling their house. You might already realize this leverage enables you to sell at a good price, but it also means you can negotiate the best terms to suit your needs.
And since buyer demand is still high, there’s a good chance you’ll get offers from multiple buyers who are willing to compete for your house. When you do, look closely at the terms of each offer to find out which one has the best perks for you.
If you have questions about what’s best for your situation, your trusted real estate advisor can help. They have the expertise and are skilled negotiators in all stages of the sales process.
Today’s buyers are motivated to purchase a home this year, and that’s great news if you’re thinking of selling. Connect with a real estate professional today to discuss how much leverage you have as a seller in today’s market.
Sellers have a great opportunity this season as buyer demand still heavily outweighs the current supply of homes for sale. According to the National Association of Realtors (NAR), today’s housing inventory sits at only a 2.6-month supply. To put that into perspective, a neutral market typically features a 6-month supply. That places today’s market firmly in the sellers’ market category.
That same NAR data also shows today’s inventory of single-family homes is trailing behind the level we saw last year (see graph below):
Because of the ongoing supply challenges, buyers can feel like they’re wandering across a vast, empty desert when searching for their next home. That means your house could provide an oasis for buyers thirsty for options – and it could increase the chances of buyers entering a bidding war for your home.
The latest Realtors Confidence Index Survey from NAR shows houses are receiving an average of 3.8 offers. A multiple-offer scenario lets you select the best offer and gives you incredible leverage when you sell this fall.
Buyers today are looking for relief as they wander today’s inventory desert. Listing your house this fall – before more options appear on the market – gives your house the best chance to be noticed by multiple buyers. Reach out to a trusted real estate advisor today so your house can stand out as the oasis it truly is.
