For homebuyers hoping for home price growth to slow down, forecasts from housing authorities are headed in the right direction.
The latest forecasts from eight housing authorities range from -2.8% to 16% growth in home prices over the next year, with an average of 6.1%. In October, Home.com’s home price growth forecast roundup found an industry average of 9.8%. However, it’s important to note we’ve since added four forecasts to the mix.
Since our last roundup, CoreLogic has softened its forecast to 1.9% from 2.2%. Both Fannie Mae and Zillow doubled-down on their forecasts of 7.4% and 13.6%, respectively. Goldman Sachs has not released a new forecast since October.
New additions to the forecast roundup include the Mortgage Bankers Association (MBA), National Association of Realtors® (NAR), Redfin, and Freddie Mac, all of which are forecasting home prices to rise by 7% or less over the next year.
The MBA is somewhat of an outlier in forecasting home prices to start falling by late 2022. This is likely a byproduct of the industry group’s projection that the 30-year mortgage rate will hit 4% and drag down demand at the end of the next year.
Historically, home prices have appreciated 4-5% per year, slightly outpacing the rate of inflation. That’s what makes real estate a good long-term investment in the U.S.
After a year of double-digit price growth, 6.1% doesn’t sound like much. But it’s still above average and (hopefully) higher than the rate of inflation. For homebuyers, 6% growth would add nearly $25,000 to the median sales price of homes sold in the third quarter of 2021.
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Home prices rely on a wide variety of factors which makes them nearly impossible to forecast, especially over the long term. And 2022 is presenting a unique set of unknowns that housing authorities are interpreting in different ways.
At the forefront, ongoing supply chain issues are driving inflation and slowing new housing supply from coming online. Inflation is proving more stubborn than previously expected and the Federal Reserve’s plan to slow inflation threatens to drive up mortgages, reduce home buying demand, and soften price growth.
But supply chain issues can also increase price growth by limiting supply. Throughout the pandemic, homebuilders have been facing shortages in materials, labor, and lots to build on. These challenges are making homebuilding slower and more expensive, both of which lead to higher home prices.
Although the forecasts used above don’t reflect it, the emergence of the omicron coronavirus variant muddies the water even further. Forecasters are now tasked with guessing which course this new strain will take and which pressure points it will push in the housing market.
While home price forecasts are wide-ranging, housing authorities are nearly in consensus on a general direction. Home prices are likely to continue rising in 2022, leaving homebuyers to decide whether to buy now and take that price growth as home appreciation or wait and pay more for a home next year.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.