Will the Housing Market Crash in 2022?
In the predictions for 2022, there’s no housing crash, per se, in this housing market forecast. However, there are multiple things predicted that could impact us in a negative way. For example, if housing prices continue rising, many first-time homebuyers (as well as other buyers) will be completely priced out of the housing market in 2022. But cost-conscious homebuyers are finally pushing back. Find out the latest predictions on this still-red-hot market, and more, in this post.
Unpredictable Home Prices = Unpredictable Predictions
Part of the problem is the unpredictability of home prices we’ve seen over the past year in particular. To put it in perspective, since 1980 – for over four decades now, the average year-over-year home price growth has been right around 4.6%. Over this past year, however, the median home price growth was nearly 20% (19.9%)! What’s worse, Goldman Sachs is predicting another 16% increase in home prices between October 2021 and December 2022. And Fannie Mae and Freddie Mac are predicting price increases of between 7%-8%.
A Seller’s Market?
It’s been a seller’s market all year, and most predictions are that things aren’t slowing too much in 2022. But this doesn’t necessarily mean home prices are going to continue to rise. Why? Because this whole crazy-housing-market-rollercoaster-ride is unprecedented, you see, post-pandemic.
A Buyer’s Market?
Contrary to the above numbers, the Mortgage Bankers Association predicts a 2.5% decrease in home prices between this year’s fourth quarter and next year’s, a slower price growth. Redfin is close, with a predicted 3% decrease, and CoreLogic predicts a low growth rate of just 1.9%. A slower growth rate means annual price appreciation falls, and existing home values drop.
Rising Mortgage Rates
Part of the reason for these differences of opinion is the variations in business models. The three who predicted lower growth rates did so due to their bet on interest rates going up. Right now we’re still at record low mortgage rates, at just 3.1%. For example, the MBA is estimating 4% will be the average rate by the end of next year.
Pricing Out Prospective Buyers
This would increase monthly mortgage payments to a significantly higher level, pricing many first-time buyers out of the real estate market altogether. For instance, on a $500,000 loan, if interest rates are at 3.1%, the mortgage payment is $2135. At 3.6% mortgage rates, Redfin’s estimate, it goes up to $2273 and adds almost another $50,000 to a 30-year loan. Therefore, you can see how this factor plays into the overall picture, here.
Buyer Demand
A big reason many are saying the housing market is going to stay strong next year is due to home buying being in such high demand. In fact, April of this year saw the highest percentage of bidding wars in history, at 74.5% of sales involving a bidding war. By October, the percentage was down to 60.3%, a significant decrease but still showing an extremely high housing demand, with existing homes for sale dwindling fast.
Housing Inventory
A big problem is our home inventory of single-family homes. A home building research company says the entry-level home supply will remain extremely constrained for the foreseeable future, due to labor shortages of home builders and supply chain disruptions. As long as there’s a problem with the supply of new single-family homes being built, expect prices to climb while demand is still so high.
Home Prices
Any way you slice it, single-family home prices are up, and they’re likely to increase over the next year – but no one seems to agree on just how much. There are so many variables that could influence the real estate market significantly. It’s hard to predict the unpredictable! But home price appreciation should also increase, the way things are going. And look at it this way; even if prices do go down, if MBA’s price drop prediction of 2.5% comes to pass, prices will still be up 20% from pre-pandemic rates.
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Things Change…
Life is unpredictable and sometimes plans change or events happen where we must change our direction. Often, these plans involve unexpected relocation. Other situations may involve a financial crisis or possibly even foreclosure proceedings. In any situation, Sell Your House Fast – Las Vegas wants to help find a solution that benefits all parties involved.
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