Real Estate Market Trends

Experts Predict Housing Market to Soften by 2022

A persistently strong economy, backed by a strong economic forecast, low unemployment, burgeoning Millennial buyers, years of limited construction, combined with pandemic conditions continue to drive home values and housing demand well above historic highs. Between August 2020 and 2021, home prices grew a record 19.9%—outpacing even the 2008 pre-recession highs of 14.1%.

While housing prices nationwide are at an all time high, the level of price growth is expected to start losing its edge in some of the nation’s biggest markets as more housing inventory hits the market and there are fewer bidding wars. We predict that housing may again shift toward a buyers’ market by end of 2022, starting in the Midwest then extending regionally to the Northeast, South, West and the rest of the nation.

According to Fannie Mae forecast 2021-2022 will continue to see strong appreciation in home values in many markets, with a predicted 7.9% annualized increase between Q4 2021 and Q4 2022. While some experts have adjusted their previous growth projections upward from a year ago, the consensus remains that the housing market beyond 2021 will experience a downward trend in real estate appreciation, demand, new housing starts and the market will once more become more favorable for buyers.

What to Expect for 2021 Heading into 2022

Heading into 2022 median home prices will continue to grow but at a lesser rate than the extreme price growth experienced through pandemic era 2020-2021. Fannie Mae predicts housing prices are set to return to a more normal level of appreciation moving into 2022. Home prices will continue rise throughout 2021 and into 2022 in many of the strongest housing markets, but housing appreciation nationwide should taper out toward 2022. Fannie Mae also predicts that in line with the downward pressure on prices from rising rates, the average 30-year fixed rate will move from 3.1% to 3.4%.

As reported by Fortune, industry insiders are already seeing housing prices begin to fall and home price growth slow in nearly many of the largest U.S. markets. One of the biggest driving factors behind the burgeoning housing market over the last several years has been pent up demand due to a deficit of housing inventory. According to 2021 Monthly Housing Market Trends, housing inventory has declined by 22.2% over the last year. However, the decline is now decelerating. Consequently, homes are beginning to sit longer on the market, and as they do buyers gain a stronger hand at the bargaining table. Through 2022, housing shortages will continue but buyers should find themselves in a slightly stronger purchasing position.

Author: Staff Editor
NAIPO staff editors come from a diverse background of professional specialties within the commercial real estate, multifamily housing and property management disciplines. Staff editors include current and previous income property investors, property.... read more
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