The U.S. housing market should be headed into saner territory for the rest of 2022, with supply and demand coming into greater equilibrium as more homes come on the market and many potential buyers sit on the sidelines amid rising inflation and mortgage rates, according to a new forecast from Realtor.com.
The forecast, released June 13, estimates that the nation’s home inventory will grow in double digits in 2022 vs. 2021, offering buyers a better chance to find a home in what has been a very tight market since the beginning of the COVID-19 pandemic.
Home sales are expected to hit their second-highest level in 15 years, trailing only the 2021 pace. Buyers will benefit from a big increase in active listings, which Realtor.com now estimates will grow 15% this year vs. last year — well up from its earlier projection of 0.3% growth in active listings.
These trends, combined with the typically busy summer selling season and a rise in production from home builders, should lead to a “refresh” in the housing market as early as this fall, according to the forecast. House hunters who can afford historically high home prices should see ample buying opportunities as others wait for prices to come down.
“Financial conditions have shifted in a big way since the end of 2021 and the housing market is adjusting accordingly,” Realtor.com Chief Economist Danielle Hale said in a press release. “As Americans grapple with higher prices for everyday expenses while today’s buyers face housing costs that are up 50% from a year ago, recent home sales data shows some are taking a step back from the market.”
The updated 2022 forecast anticipates that demand will “continue decelerating through the summer,” she added, which will provide “breathing room” for the inventory recovery to accelerate.
“As a result, this fall could be an opportune time to find a home — for both first-time and repeat buyers alike,” Hale said. “Still, preparation will be key throughout 2022, as it continues to be a seller’s market and asking prices remain high. For buyers who choose to wait until later in the year, take that time to assess your budget so you’re set up with a strong financial footing whenever you’re ready to move forward.”
According to the updated Realtor.com forecast, mortgage rates for the rest of 2022 will rise 5.5% from a year ago, up from an earlier projection of 3.6%. That should contribute to a 6.7% decline in existing home sales — down from an earlier projection of a 2.9% increase.
The current inflation rate — the highest since 1981 — has a lot to do with the changing forecast because it has put an additional financial strain on potential home buyers. At the same time, historically low unemployment has given workers more leverage to negotiate higher salaries and greater workplace flexibility. This in turn has created more opportunities to relocate to comparatively affordable housing markets. First-quarter 2022 data show that 40.5% of Realtor.com home shoppers viewed listings located outside of their current state, up from 33.4% in 2020, before the pandemic.
“Overall, the updated 2022 forecast reflects a housing market that is charting a path toward more sustainability, relative to the past two years of ups and downs,” Realtor.com said. “Home sales are still projected to hit a near record-high pace in 2022 despite trailing 2021 levels…For many Americans, housing affordability will remain a significant obstacle as demand continues to outmatch supply, although by a smaller margin than in recent years.”
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