NAR Predicts Higher Home Sales, Prices and Rates in 2022
John Jordan | December 16, 2021
WASHINGTON—As part of the National Association of Realtors’ Real Estate Forecast Summit held on Dec. 15, real estate economists and experts predict a continued strong market, marginal improvement in the nation’s for-sale inventory crisis and higher interest rates.
The virtual program began with an opening address by 2022 NAR President Leslie Rouda Smith, followed by a keynote address by Todd M. Richardson, general deputy assistant secretary for policy development and research at HUD; an economic outlook by NAR Chief Economist Lawrence Yun and a Housing Outlook panel that featured: Ken H. Johnson, Associate Dean of Graduate Programs, Florida Atlantic University; Lesli Gooch, Ph.D., CEO, Manufactured Housing Institute; Naa Awaa Tagoe, Acting Deputy Director, Division of Housing Mission and Goals for the Federal Housing Finance Agency; and Danielle Hale, Chief Economist, Realtor.com.
NAR President Smith said that the association believes that interest rates will rise in 2022 and that inventory levels will begin to increase next year as well. Later that morning, a majority of members of the Federal Reserve indicated the Fed would likely increase short-term lending rates three times next year, possibly beginning in the spring.
Lawrence Yun, chief economist with the National Association of Realtors, revealed that NAR believes that when all home sales close at the end of December, 2021 sales will be at the highest level since 2006. Dr. Yun is the subject of this month’s Five Questions With feature.
Realtor.com Chief Economist Hale outlined a host of predictions for 2022. She said that there is concern about inventory levels. “One of the things that we are optimistic about in our forecast is that there is not going to be a huge change, but we do expect that inventory will bottom out and start to increase into 2022,” she said.
Hale added that Realtor.com sees strong buyer demand boosting home sales in 2022. Sales will be spurred in future years by the 45 million people in the 26-35 age group who will be looking to form families in coming years. Realtor.com expects the median home sale price to rise by 2.9%; existing home sales to be 6.6% higher, for sale inventory to increase slightly by 0.3% and mortgage rates to average 3.3% for the year and be at 3.6% at the end of 2022.
Other trends Hale sees in 2022:
• Home sales to reach 16-year highs.
• Home prices to increase but at a more moderate pace.
• Apartment rents will outpace home price growth.
• Home buyers will continue to prefer the suburbs.
• Hispanic buyers will continue to be a growing demographic.
In her 2022 forecast posted at Realtor.com, Hale noted, “while urban areas continue to be pricier and fast-paced, the advantage of shifting to the suburbs to get a better bang for the buck and face a less competitive market has eroded. Nevertheless, with affordability likely to be even more top of mind for buyers in the face of rising home prices and rising mortgage rates, the suburbs are likely to maintain their recent cachet.”
Hale noted that 2022 will continue to be a seller’s market. “Homebuyers have much to look forward to in 2022. After years of declining, the inventory of homes for sale is finally expected to rebound from all-time lows. Still, the housing market will remain competitive for buyers, particularly for those looking for homes in entry-level price tiers,” she stated in her online forecast.
She also noted that with market conditions as they are, first-time homebuyers face an uphill journey in many markets. “First-time homebuyers will need to be successful in the 2022 housing market if we are going to see the homeownership rate begin to climb again,” Hale said. “In many respects it will be an uphill journey given the slightly better but still-limited for-sale inventory environment, high and rising prices, and rising mortgage rates all pushing monthly costs higher.”