What should home buyers, home sellers, real estate agents, and investors expect from the 2022 real estate market?
There are three major reasons why there will probably not be a housing market crash in 2022: or lets see real estate market in 2022
1. Inventory is low.
Unlike 2008, inventory has declined to critical levels. The U.S. housing industry is 3.8 million single-family homes short of what is needed to meet the country's housing demand, up 52% as compared with 2018's shortfall, according to a new analysis from mortgage-finance company Freddie Mac. In 2018, Freddie Mac had estimated that the housing market was 2.5 million units short of what it needed to meet long-term demand. The new estimate is as of the end of 2020, and it emphasizes the severity of the housing supply.
2. Lenient forbearance terms and home equity.
FHFA Director Mark Calabria said:
For homeowners in forbearance due to covid-19, payment deferral allows them to make up missed forbearance payments when they sell their home or refinance… This new forbearance repayment solution responsibly simplifies options for homeowners while providing an additional tool for mortgage servicers. Borrowers who can pay their mortgage should, because missed payments remain an obligation that will ultimately have to be repaid.
3. The economy continues to grow
The Bureau of Labor Statistics (BLS) publishes an occupational outlook each year that goes into great detail about each industry and occupation. Overall, the BLS expects total employment to increase by 6 million jobs between 2019 and 2029. Manufacturing and retail industries will continue to shed jobs, while e-commerce continues to grow.
A 2013 prediction by the BLS expects that from 2012 to 2022, GDP will grow at a rate of 2.6% per year, reaching $17.6 trillion in the target year of the projections. The unemployment rate is projected to gradually decrease to 5.4%, accompanied by a gain in household employment of 12.3 million jobs.
Diane Swonk, Chief Economist at Grant Thornton, said she expects 2021's growth rate to be 6.6%, the strongest year since 1984. She expects 4.3% annualized pace of growth for Gross Domestic Product in 2022.
Real Estate Market Forecast: Housing Affordability Will Be the Problem
In a new report from the Urban Institute, researchers found that over the next two decades the U.S. homeownership rate could decline to 62.1%. They project that the overall homeownership rate will fall from 65% in 2020 to 62% by 2040.
Household growth averaged 12.4 million per decade between 1990 and 2010, and 7.3 million between 2010 and 2020. They estimate an average growth of 8.5 million from 2020 to 2030 and 7.6 million from 2030 to 2040. This decline is the result of slowing U.S. population growth AND lower headship rates for most age groups.
Another key finding is that renter growth will more than double the rate of homeownership growth from 2020 to 2040.
The number of families spending more than 50% of their incomes on mortgages or rent has significantly increased. Rising building materials cost and low inventory is pricing first time buyers and investors out of desired locations, and this may be the real issue.
When Will the Housing Market Crash?
The good news is that the real estate forecast next 5 years by many analysts is that we aren't going to witness a housing market crash. The more likely scenario is that price growth will slow down till normalcy is reached.
Earlier this month, the property data and analytics company CoreLogic published a housing market update that focused on prices. According to their real estate market forecast:
Nationally, home prices increased 10.4% in February 2021, compared with February 2020… Home prices are projected to increase 3.2% by February 2022.
This 3.2% price appreciation projection is close to the normal rate of price appreciation in a stable market. Based on CoreLogic's prediction, it appears we will see the frenzied rate of growth witnessed in the recent past stabilize in 2022.
Will Home Prices Come Down in 2022?
We do not think home prices will come down in 2022. Experts forecast a slow down in price appreciation, but the imbalance in demand and supply will keep home prices up.
This real estate market forecast offers projections on what we think the 2022 real estate market will be like. However, it is a prediction. Just as 2020 taught us that nothing is certain, this real estate market forecast is not set in stone. But it can help guide you as you plan towards navigating the housing industry in 2022 either as a real estate buyer, a realtor, or an investor.