Expect slower housing price appreciation, easing inflation and rising interest rates in 2022, according to a survey of more than 20 top U.S. economic and housing experts. Lawrence Yun, NAR chief economist and senior vice president of research, unveiled the consensus forecast today during NAR’s third annual year-end Real Estate Forecast Summit.
For 2022, the group of experts predicted that annual median home prices will increase by 5.7%, inflation will rise 4% and the Federal Open Market Committee will twice increase the federal funds rate by 0.25%. The housing market performed better than it has in 15 years in 2021, with an estimated 6 million existing-home sales. As mortgage rates tick up slightly, Yun predicts existing-home sales will decline to 5.9 million in 2022. He also forecasts a modest increase in housing starts to 1.67 million as the pandemic’s supply chain backlogs subside.
The strong demand for homes simply cannot be met by the current low supply, which is why we expect the market to remain robust even as rates rise. Just look at these key factors:
Median home prices are projected to grow 5.7% next year. (National Association of Realtors)
The U.S. has underbuilt housing by at least 5.5 million units; it would take a dramatic, sustained surge in home-building to meet demand. (National Association of Realtors)
71.2 million Millennials will reach prime home-buying age by the end of this decade. (Freddie Mac)
The higher projected mortgage rates will still be lower than pre-pandemic levels. (Mortgage Bankers Association)
Remote workers with high incomes and high mobility are predicted to remain in a strong economic position. (Deloitte Insights)