Experts Predict What The Housing Market Will Look Like In 2022

Daryl Fairweather, chief economist for Redfin: After two years of unprecedented uncertainty in the housing market, we’re expecting 2022 to be just as unpredictable. We expect 30-year-fixed mortgage rates to slowly rise from around 3% to around 3.6 by the end of the year, mostly attributed to the pandemic subsiding and inflation continuing to linger.

By late fall, high mortgage rates, paired with already high housing prices, will likely slow annual price growth to roughly 3%. This low price growth will likely discourage speculators from entering the market, giving first-time home buyers a better chance at securing a home.

In 2022, we also predict home buyers will start considering climate change as a major factor in their home-buying decisions, as natural disasters and extreme weather events continue to increase in frequency. Home sellers will also likely make significant investments in climate-change resilient home features in order to appeal to climate-conscious home buyers.

Jarred Kessler, founder and CEO of EasyKnock: As the country begins to move towards a new post-pandemic normal, I expect lingering economic uncertainty will continue to drive the unpredictable housing market in 2022. We’re in the midst of historically low interest rates that are driving a hot housing market, but what goes up, must come down, and I expect the housing market will slow after the new year as interest rates will undoubtedly go up.

However, in 2022, we will continue to see new home construction not meet the continued demand as the United States deals with ongoing supply chain issues and labor shortages. This will lead to fewer new homes on the market, which means even with increasing interest rates, we may still continue to see record-high sale prices. All of this perpetuates the need for alternative methods of buying and selling and supports the growth of companies like EasyKnock that allow American homeowners to convert the equity they’ve worked hard to build.

Anita Kramer, senior vice president for the ULI Center for Real Estate Economics and Capital Markets: The Urban Land Institute’s Emerging Trends in Real Estate 2022 report notes rising home prices and rents will bring about a renewed focus on the country’s affordability crisis in 2022. As millions of potential home buyers are priced out of a growing number of markets, prices continue to rise faster than wages, and down payments are out of reach for many. Many must remain in the rental market but face similar price increases. Further, costs of for-sale and rental housing are rising much faster in secondary and tertiary markets as people search for more affordable housing.

Studies show that declining affordability inhibits migration and thus slows job growth because qualified workers cannot move to where the jobs are. Thus, the beneficiaries of improving housing affordability extend far beyond the immediate recipients by increasing overall economic growth and prosperity.

Frederick Warburg Peters, CEO of Warburg Realty in New York City: Increasing interest rates will most likely impact the national real estate market more than any other factor during the early months of 2022. While there is no reason to anticipate a falling market, the interest rate rise will have a psychological impact in dampening any market exuberance. That, combined with the return of sensible practice to the iBuying market after the spectacular Zillow flameout, should keep prices at current levels in most markets during the first and second quarters.

The luxury market may behave somewhat differently. Even with the Omicron variant on everyone’s mind, foreign money has turned again towards the United States. This will help underpin a market already flush with cash from the huge gains in business and the stock markets throughout 2021. These buyers, always less impacted by mortgage rates than the buyers of more modest properties, will keep this market strong through the foreseeable future, perhaps even showing a little escalation in prices.

Sue Yannaccone, chief executive officer and president of Realogy Franchise Group: Real estate is entering a new era. The pandemic-fueled frenzy we saw over the last 24 months is giving way to a new kind of real estate market – one that will be driven by solid and sustainable demand we haven’t seen in over a decade. Prior to 2020, there had been around 5 to 5.5 million resale home transactions a year. The market was effectively stuck at a stagnant level of homes and home buyer demand. The pandemic and lifestyle changes that followed, such as remote and hybrid work styles that have opened up the freedom to live and work from anywhere, have helped unleash new dynamics in the market. And we’re starting to see it in action already: 2020 had 5.6 million resale transactions, while 2021 is shaping up to have around 6 million resale home transactions, according to the National Association of Realtors.

While the real estate roller coaster of 2020 and 2021 may appear to be returning to normal seasonality as we approach 2022, demand is not waning. The changes to Americans’ working and living behavior are also compounded by demographic shifts giving way to a new generation of homebuyers. Making up the largest share of new home buyers in the U.S. and entering their 30s and 40s at a growing rate, Millennials are finally getting off the sidelines of the housing market.

In 2022, we may very well experience the year of the Millennial home buyer, with Gen Z (already in their early 20s) close behind. With remote and hybrid work decisions freeing these populations from the constraint of a daily commute and an increasing demand in home office space, we expect to see this demographic evolution continue to fuel the market. As we enter this period of sustained demand, inventory will be the metric to watch.

Nick Bailey, president of RE/MAX, LLC: Home buyers should find the coming months to be more advantageous than any time in 2021. While sellers remain in a very strong position, price stabilization and the continuation of competitive interest rates may bring some welcome relief to buyers in the new year. Inventory is and likely will remain a challenge for some time as shortages in labor and materials, as well as general supply chain challenges, delay new construction. Last year was a strong year for sales and 2022 should continue to be. As the market begins to rebalance and buyers who were sitting on the fence decide to get in the game, the value of a skilled, full-time real estate professional will be even more evident.

Much of the real estate industry could be digitized even before social distancing spurred a radical uptake in digitization. The push toward modernization will continue at lightning speed, yet while more homes are found online and virtual home tours take the place of open houses, the emotional investment and industry-understanding that agents can provide for a complex transaction will remain crucial to the home-buying and selling process.

Brent Fielder, executive vice president of Proper Title: We expect to see incremental growth in housing sales in 2022, but a significant drop in refinancing activity as interest rates rise. The real estate-owned (REO) market—also called lender-owned property—will increase as Covid mortgage bailouts expire.

The home-buying experience will proceed with its digital transformation as the real estate brokerage and title industries continue to embrace technology. Electronic options for closings and sales opportunities will become more commonplace for everyday use, which meets the demands of Gen Z and Millennial home buyers. Top priorities for real estate agents and attorneys will be establishing strong customer connections for referral transactions and staying on top of evolving market and industry trends.

Lawrence Yun, chief economist for the National Association of Realtors: Mortgage rates will drift higher as the Fed scales back the purchase of the mortgage-backed securities and raises short-term interest rates, which are likely to hit 3.7% by the year-end 2022 on a 30-year rate after hovering at 3% for most of 2021.

Home sales will notch lower by 2% in 2022, principally because of higher mortgage rates. Home sales will not crash thanks to job gains, investor demand and the work-from-home reshuffle in residential location choice.

Inventory will finally increase due to more home construction, the ending of the mortgage forbearance program and the rise in Covid-related deaths among the elderly. Softer housing demand with more supply will calm the home price growth. Home prices will only rise 3% to 5% nationally.

Skylar Olsen, principal economist for Tomo: Housing in 2022 should be calmer, but don’t expect the full return to sanity. Anyone who explored buying or selling a home this shopping season experienced something intense. We just didn’t know how hot housing markets could get until new record lows on interest rates moved up first-time buyer timelines.

With many parents pulling out their equity to get down payments for their adult children or second home buyers using up portfolio collateral to buy homes away from struggling urban cores, and investors rushing in to diversify portfolios away from over-valued stock markets and capitalize on the potential long-run demand shift that of remote work might bring, the housing market has been anything but typical or normal.

So what will be different about next year? Well, investor buyers are fast, early movers and interest rates should start to rise. Both these things imply some pressure could come off. The urgency to buy now for the financial opportunity of historically low rates or the arbitrage opportunity from remote work will be less. However, there will still be plenty of buyers hoping to hit life’s milestones in a new home.

The pre-pandemic fundamentals were indicative of a demographic wave crashing onto too few homes. The majority of forecasts expect home prices to continue to rise next year, and we agree. Housing will be slower, but only compared to the fastest market in history.

Tom Rossiter, CEO of RESAAS: Prior to Covid, using technology was seen by many real estate agents as a “nice to have.” Now it’s simply a requirement to do business. We expect real estate technology to further evolve in 2022, and for both sellers and buyers to use digital tools even more during the entire home-buying process – from listing to interacting with agents to closing deals.

Patterns we are observing from our exclusive real estate data show us that heightened buyer migration is still not over. The Great Relocation of 2020, where people realized remote work unlocked where they call home, set new records. We are still seeing elevated levels of referrals for buyers looking to move out of state and predict this will continue into the new year as well.

Robert Dietz, senior vice president and chief economist for the National Association of Home Builders: With housing demand solid and existing home inventory too low, home construction should continue at a strong pace in 2022, according to NAHB forecasts. Single-family builder confidence at the end of 2021 is high, registering a level of 83 on the NAHB/Wells Fargo Housing Market Index. We expect a slower growth rate for home building in 2022, but the level of single-family housing starts will be about 25% higher than it was in 2019, pre-Covid.

Nonetheless, supply-side headwinds are limiting the pace of construction and increasing costs. In particular, ongoing supply chain challenges, insufficient lumber production, higher lumber tariffs and delays for deliveries of just about all types of building materials have frustrated builders and buyers. Construction costs are up 19% year-over-year. In 2022, some of these supply chain issues will ease, but the skilled labor shortage will grow worse. The construction industry needs to add 740,000 workers a year to account for industry growth and yearly retirements from the sector per a new NAHB estimate for the Home Builders Institute.

Higher construction costs and an expectation of rising interest rates, as the Federal Reserve tightens monetary policy on inflation concerns, will result in additional declines for housing affordability. Policymakers should act to reduce the cost of land development and home construction. Communities that successfully do so will win the competition for population growth and business expansion.

Additionally, multifamily construction should continue to expand, given ongoing growth in rents. Suburban apartment construction in 2020 and much of 2021 made up for some weakness in urban core areas, but now most geographies are seeing gains for multifamily development. In addition, the single-family built-for-rent segment should continue to expand after experiencing the best quarter on record during the third quarter of 2021. And given wealth gains for homeowners due to rising home values, the remodeling sector will realize strong growth in 2022 as homeowners seek to add space, improve energy efficiency and increase resiliency of an aging existing housing stock.

M. Ryan Gorman, CEO of Coldwell Banker Real Estate: Fundamental demand from home buyers remains strong as Americans continue to dream of homeownership, and those dreams may be more likely to become reality due to partial remote work widening search areas to positively impact affordability, even with price increases.

In addition, during the tail end of 2021, foreign buyer and investor interest in U.S. real estate and mortgage assets was heightened. If that continues, demand could escalate further, hopefully coaxing more existing inventory onto the market, though new construction will likely continue to face supply chain delays. As funds from around the world seek safe, stable and valuable investment opportunities, U.S. real estate remains among the most attractive and largest asset classes for investors and families alike. With continuation of these trends, the seller’s market that we’ve seen this year may continue into 2022.

Robert Morgenstern, principal of Canvas Property Group: Bidding wars, once primarily the purview of condos and co-ops, reared itself in the 2021 leasing season and show no sign of stopping in 2022.

In the summer and early fall of 2021, we began to see an unprecedented spike in rental demand, and with this, a tightening of the market. This will all just intensify in 2022 due to a lack of new development—thanks to a lack of tax incentives on multifamily assets—and zero new supply of units through the system of deregulation, along with a demand-side increase as young employees return to work while working in a hybrid model. These drivers will create a tailwind to New York City’s free-market rent growth and the rental unit bidding wars will intensify.

The residential rental market in general will see increased demand, most intensely in primarily residential areas where the retail and restaurant scenes are thriving. Throughout the nearly 2,000 apartments and 60 assets we own and manage in New York City, we saw the market explode in direct correlation to the nightlife scene in that submarket. Neighborhoods like the East Village, Lower East Side and Williamsburg all did best. The type of building and amenity offerings were fairly irrelevant from our perspective.

Carla Ferreira, director of onsite development and principal at The Aurora Highlands: We anticipate a strong 2022 for the Colorado market as lot availability widens, the economy stabilizes further and more product is offered. Home sales should increase as buyers are feeling urgency with expected interest rate increases coupled with rising prices in 2022.

The trend of Millennials moving to the suburbs will continue as will the moderate increase in new home prices. Homeowners are looking towards master-planned communities that offer home buyers amenities, room to grow and home offices.

Approximately 75% of new home starts are currently larger communities. We do anticipate a 10% to 12% increase for starts and closing, however there will continue to be a lag in closing times due to supplier and labor challenges.

Laura Ellis, president of residential sales and executive vice president of Chicago-based Baird & Warner: Underlying fundamentals point to another robust year in 2022 with inventory as the wild card. Competitive bids are already slowing down so that may entice many potential buyers who avoided entering the market last year because they were intimidated by multiple offer situations.

If low inventory persists, it could be a market spoiler. As of November 2021, the number of active listings was down nationally more than 55% compared to November 2019 and will continue to be the most significant limiting factor. There’s a lot of pent-up demand from buyers, but sellers will continue to be hesitant in listing their property if they aren’t confident about finding – and closing – on their next home.

Oisin Hanrahan, CEO of Angi: In 2021, we saw a significant shift in the way people think about their homes. The value of home has a new meaning, shifting from thinking about our homes first for its fiscal value or as an investment, to now where our home’s many uses are the primary focus.

For the second year, homeowners have told us that their main reason for taking on projects around the home is to better meet their needs. Before the pandemic, return on investment was the primary motivation. This is a huge shift and something we know will continue throughout 2022, especially as people continue to spend more time at home. As these trends play out further and projects that were put on hold due to Covid disruptions resume, we’ll see the demand for home projects increase to meet the newfound time and focus on the home.

We also continued to see Millennials step into homeownership. As the first digital native home-buying cohort, they expect solutions on demand, on their phones and a simple, easy experience. Their expectations will shape and impact home services in the year ahead, including a strong desire for end-to-end services that align with consumer expectations.

Frank Nothaft, chief economist for CoreLogic: With the Federal Reserve gradually tapering its supportive monetary policy, look for 30-year mortgage rates to average about one-half of a percentage point higher in 2022, or about 3.4%. We expect to see a moderation in buyer demand as the erosion in affordability takes a toll and additional for-sale inventory comes on the market.

With more supply from new construction and existing owners relocating, home sales are expected to rise to the largest number since 2006. With less demand, we expect homes listed for sale will be on the market a bit longer with fewer competing bidders, which should moderate price growth. The CoreLogic Home Price Index Forecast has the annual average rise in the national index slowing from 15% in 2021 to 7% in 2022.  Similarly, rent growth on single-family homes reached the highest ever recorded in the CoreLogic Single-Family Rent Index in 2021 and is projected to slow as additional rentals enter the market.

While we expect home-purchase originations to rise, the higher mortgage rates will reduce refinance originations and alter its composition. Refinance originations will likely have a much larger cash-out share in 2022 with slightly lower average credit scores and lengthening of the average loan term.  Employment and income growth should continue to keep new delinquencies at a very low level. But the end of foreclosure moratoria and the CARES Act forbearance program will likely result in an uptick in distressed sales in 2022, but this increase will be small.

2022 should be a strong year for housing. Look for mortgage rates to rise but remain historically very low, home sales to grow to a 16-year high, price and rent growth to slow, refinance to shift toward cash-out and delinquency rates to remain low albeit with an uptick in distressed sales.

Matthew Vernon, retail and centralized lending executive for Bank of America: Prices throughout 2021 have risen substantially, and competition has been hotter than ever given the low supply of homes. At the same time, rent prices have sped past projected estimates based on pre-pandemic trends, making homeownership and steady monthly mortgage payments even more attractive, particularly for Millennial buyers.

This demographic is in its peak home-buying years and 52% of younger generations say the importance of building equity has become more important recently. We expect to see a continued increase in home-buying interest and competition while mortgage rates remain low. We’ll also see some homeowners wanting to trade up to larger homes. As the Federal Reserve may raise interest rates next year, those already in the position to look into larger homes will aim to tap into lower rates while they can next year.

Jeff Benach, principal of Chicago-based Lexington Homes: Overall, the housing market should stay pretty hot through 2022, including markets like Chicago. As of now, all indicators point that sales will likely continue at a fast clip until the supply chain issues settle down and until we get completely past Covid-19, both of which should occur in 2022 when the pandemic will be considered behind us by most people. Inflation often helps housing, and it certainly doesn’t seem to have hurt it so far. As for new-home sales specifically, expect to see the continuation of Millennials as the demographic leading the charge in 2022.

Home designs will also continue to be influenced by the pandemic – likely well beyond 2022 – as buyers demand more from their homes, such as multiple offices or remote work/study spaces and multifunctional kitchens that can do it all.

Ben Miller, co-founder and CEO of Fundrise: Some pundits, alarmed by slowing sales in the fourth quarter, are forecasting doom for the residential real estate market next year. But the doomsayers miss a key point: seasonality. Historically, housing prices regularly move almost 7% to 8% between the lows of winter and the highs of spring. Yet every winter, outsiders mistake seasonal swing for secular decline. We expect to see housing prices surge in spring 2022. And beyond that, we expect continuing strength in the single-family rental market, which has soared over the past 18 months.

More crucial to the expected surge in home prices: the excess positive pressure on the economy. The U.S. annual inflation rate is above 6%. Unemployment claims are at their lowest in 52 years. Interest rates are still at historic lows. At least $1 trillion and as much as $3 trillion of fiscal stimulus is underway. And, according to Moody’s Analytics, Americans have $2.5 trillion in overall excess savings from the pandemic era. That buys a lot of houses. So, buckle up.

Susan Wachter, the Albert Sussman professor of real estate at The Wharton School of the University of Pennsylvania: After a year of home prices rising at a blistering 18% rate, housing prices are expected to decelerate to single-digit rates across major metropolitan markets. Fed actions to contain inflation, now running at a 40-year high, will cause, in the consensus forecast, a small (0.5%) uptick in mortgage rates in 2021. This will moderate demand.

If inflation persists or heats up further, a liquidity retreat and a negative tail event with an interest rate spike are possible, although not likely, for 2022. The likely outcome is that 2022 will be a banner year for housing, with single-family starts at over 1 million, and easing inventory constraints. Nonetheless, demand and supply imbalances will persist and high construction costs, due to persistent labor, materials and land shortages, will generate increases in home prices, although at lower rates than in 2021.

Population mobility will remain low, but expect continued movement to lower-cost metros with outdoor amenities and employment growth. Texas, Florida, Arizona and North Carolina will continue to outpace the nation in new home sales.

For the nation as a whole, expect homeownership headwinds. As Millennials, who are in their prime home-buying years, postpone homeownership, multifamily demand and rents will rise, adding to a challenging economy of scarcity, even amid strong economic growth and the prospect of a pandemic recovery.

Dawn Pfaff, president and founder of My State MLS: We are forecasting that prices will continue to rise in 2022 but at a more moderate pace than 2021. Going into 2022, demand won’t be as high, and supply is going to be a bit better than 2021. Mortgage rates will grow but still be a reasonable value for home buyers. Inventory of available properties will remain low, but home builders are ramping up, and many sellers are itching to sell at their new higher prices.

We expect rents to outpace home price growth because demand is still greater than supply. First-time home buyers will continue to struggle because of higher prices and the supply problem. Bottom line, 2022 is still going to be a seller’s market, just not as frenetic as 2021.

Gary Beasley, CEO and co-founder of Roofstock: Historically, real estate has been a powerful inflation hedge as owners can raise rents to keep pace with rising costs. I feel pretty confident that we are at, or near, peak inflation at 6.8% in November. We’ll see it moderate meaningfully over the course of 2022 as we get past the easy comparisons to some of the worst Covid-influenced periods of 2020 and steadily work our way through supply chain disruptions.

Modest interest rate increases and Fed tapering should also serve to cool an economy that is currently running a bit hot, leading to somewhat reduced demand bringing down inflationary pressures. Next year, I expect yield-seeking investors to trade out of fixed income into real estate as bonds become increasingly unattractive and Fed rate increases become more likely to tap the brakes on the economy

Sean Grzebin, head of consumer originations, Chase Home Lending: According to a recent survey of first-time home buyers that Chase conducted this year, 60% said they were likely to buy their home in the next year, and 70% have already made lifestyle changes in order to work toward achieving that goal. This shows us that Americans continue to aspire for homeownership, that they still view home buying as a smart decision for building wealth, and as we head into 2022, that they’re serious about reaching their goals to own a home.

Additionally, the latest generation of buyers will be more diverse than ever before. According to a 2021 report by the Urban Institute, net growth in the number of homeowners in the next 20 years will be entirely among people of color, especially Hispanic homeowners. Between 2020 and 2040, there will be 6.9 million net new homeowner households, a 9% increase. Hispanic homeowners are expected to grow by 4.8 million and Black homeowners by 1.2 million.

Despite home-buying optimism, there are still barriers that exist to prevent people—particularly Black and Latin/Hispanic communities—from accessing and sustaining homeownership. Many of these families may be home buyer-ready today, but the challenge is making sure they know that—and ensuring that we have the home financing products and services that fit the needs of this new set of home buyers.

One of the new ways Chase is helping to educate home buyers is through our Beginner to Buyer podcast launched this year. The podcast aims to break down barriers to homeownership by hosting real conversations with real people, helping to answer the questions you always wondered, but were maybe too afraid to ask.