The housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes. The Census Bureau has released its most recent quarterly report, which includes data through the third quarter of 2021.
Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes. The only factor of concern is the housing supply which continues to fall short of demand.
The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance.
Don't worry; a housing market crash isn't in the offing. The housing market is instead entering a cyclical drawdown, which is entirely normal. Looking at the real estate market, many people are wondering — can rising mortgage interest rates cause a housing market crash?
Realtor.com's forecast and housing market predictions on key trends that will shape the year ahead. Home prices, sales trends, suburbs vs. cities, Millennials, and more as we look toward 2022.
Summary: Kathy Fettke, co-founder of RealWealth, has shared her housing market predictions since 2005, and these predictions have been correct every single year. Learn more about Kathy’s story here.. As a buy and hold real estate investor, market researcher and real estate syndicator, she believes it’s essential to understand demographic trends and migration patterns.
Will the housing market improve in 2022? The 2021 housing market was a tough one for home shoppers. Low rates and increased flexibility from working remotely put many first-time homebuyers on the map.
On the other hand, if the number of houses for sale was crazy high and the number of buyers willing to buy them suddenly plummeted, home prices would get slashed—and that’s when a crash would be something to worry about.
In a Zillow research study, more than 69% of real estate gurus surveyed said they expected more houses to go up for sale in the second half of 2021 or the first half of 2022. 26 And if more homes go up for sale, home prices should cool down too. Experts are predicting annual home value growth to slow to 4.5% in 2022 and continue a downward trend through 2025. 27
Experts are also predicting more housing starts (aka new construction) in 2022. Look at it this way: There were 1.38 million housing starts in 2020, and it’s looking like 2022 will see more like 1.68 million. 28 More new houses means more inventory and less market mayhem.
But total foreclosures year over year are still way down. In the first half of 2021, there were 65,082 foreclosures. 15 That means overall foreclosures compared to the same period last year are down 61%. 16
But the bottom line will mostly stay the same: Home sales and prices are likely to stay higher for the remainder of 2021 compared to last year, while inventory will remain relatively low.
That means you’ll probably still have a good chance of locking in a lower-than -average mortgage rate. And for the record, lower rates are a good thing because they mean a lower monthly payment and less of your money going toward interest over the life of the loan. Woo-hoo!
It’s pretty unlikely that the housing market will crash in the next two years. Remember, home prices have already seen a 23% increase in 2021, almost triple original predictions. 17, 18 That’s a good thing for the economy!
Although housing sales were up 44.6 percent year on year (4.01 million in May 2020), the comparison is heavily skewed because the housing market was effectively shut down for two months at the start of the pandemic. Last summer, the market recovered and remained strong for the rest of the year.
Due to the brisk demand, purchasers have been frantically bidding up the prices of available houses, sending property prices skyrocketing. House prices in all the major local real estate markets continue to rise. The housing market is becoming harder for home buyers. The demand is high, and the supply and inventory are lacking.
Buyers are driving up home prices in the 2021 housing market, causing homes to sell quickly. Some hyperactive buyers make offers without seeing the property and forego contingencies in order to win bidding wars in the highly competitive housing market.
New home sales fell 5.9% in May from April, to 769,000. The median sales price of new houses sold in May 2021 was $374,400, up 2.5% from April and 18.1% year-over-year.
The rates were cut in 2020 as a result of the pandemic, which helped to mitigate the impact of increasing prices. In January 2021 it reached a record low of 2.65%, driven by massive monetary incentives and investors' economic recovery concerns. Rates rebound from their lowest point in the first week of April to 3.18%. The Federal Reserve’s continued monetary easing, and especially the bank’s monthly purchases of mortgage-backed securities, is keeping a strong downward pressure on rates.
In October, newly listed homes declined by 2.3% on a year-over-year basis following typical seasonal patterns. However, sellers are still listing at rates 11.6% lower than typical of 2017 to 2019 levels. Last month saw a shift in direction, with fewer new sellers listing homes than the previous year, and this trend continued this month.
Nationally, the inventory of homes for sale in October decreased by 21.9% over the past year, a similar rate of decline compared to the 22.2% drop in September. This decline amounted to 179,000 fewer homes actively for sale on a typical day in October compared to the previous year. A slowing in the decline of inventory indicates that the market is improving, but active inventory remains historically low. The total number of unsold homes nationwide–a metric that includes active listings and listings in various stages of the selling process that are not yet sold– is down 14.8% percent from October 2020.
On the other hand, if the number of houses for sale was crazy high and the number of buyers willing to buy them suddenly plummeted, home prices would get slashed—and that’s when a crash would be something to worry about.
In a Zillow research study, more than 69% of real estate gurus surveyed said they expected more houses to go up for sale in the second half of 2021 or the first half of 2022. 26 And if more homes go up for sale, home prices should cool down too. Experts are predicting annual home value growth to slow to 4.5% in 2022 and continue a downward trend through 2025. 27
Experts are also predicting more housing starts (aka new construction) in 2022. Look at it this way: There were 1.38 million housing starts in 2020, and it’s looking like 2022 will see more like 1.68 million. 28 More new houses means more inventory and less market mayhem.
But total foreclosures year over year are still way down. In the first half of 2021, there were 65,082 foreclosures. 15 That means overall foreclosures compared to the same period last year are down 61%. 16
But the bottom line will mostly stay the same: Home sales and prices are likely to stay higher for the remainder of 2021 compared to last year, while inventory will remain relatively low.
That means you’ll probably still have a good chance of locking in a lower-than -average mortgage rate. And for the record, lower rates are a good thing because they mean a lower monthly payment and less of your money going toward interest over the life of the loan. Woo-hoo!
It’s pretty unlikely that the housing market will crash in the next two years. Remember, home prices have already seen a 23% increase in 2021, almost triple original predictions. 17, 18 That’s a good thing for the economy!