An outside panel of economists and housing experts is evenly split on whether home sales will rise or fall in 2022 as concerns over worsening affordability collide with expectations for rising inventory.
When asked whether sales will rise or fall in 2022 compared with 2021, 41 percent of participants in a recent Zillow Home Price Expectations Survey said sales will grow, 41 percent predict a slowdown, and 18 percent believe sales will remain roughly the same.
Zillow’s own forecast calls for sales of existing homes to increase a bit in 2022, drawing on recent sales performance, household formation rates and the expectation that mortgage rates will remain relatively low.
“In America’s frenzied pandemic-era housing market, buyers and sellers have both defied expectations: Buyers have forged on in the face of record-fast price appreciation, and homeowners have steadfastly demurred from cashing in on this selling opportunity,” Zillow Senior Economist Jeff Tucker said in a release. “The outlook for home sales in 2022 hinges on which side yields first. If buyers finally balk at unaffordable prices, sales volumes could fall. But if homeowners finally start listing their homes en masse, we could see a sales bonanza, cooling the pace of appreciation. Our expert survey panel was split right down the middle on which scenario to expect.”
Panelists who foresee lower sales in 2022 point to financial strains on buyers as the main driving factors. Worsening home affordability was cited by 54 percent of respondents as the most important reason for a sales decline, while higher mortgage rates were noted by 28 percent.
Among those who anticipate an uptick in sales, additional inventory is overwhelmingly cited as the key; 51 percent said an increase in existing homes listed for sale will be the most important factor, while 21 percent pointed to more new homes being completed and listed for sale.
Over the past two years, home value growth in many large metros has been higher in areas with longer commutes to downtown, a reversal of past trends. Most panelists surveyed believe these trends will continue in 2022, with 46 percent expecting growth rates in downtown to slow more than those farther out, compared with 34 percent who believe downtown values will rise faster than those in suburban areas.
Although every respondent expects nationwide home price appreciation to slow in 2022 from last year’s record-breaking pace, the average of their long-term projections remains among the most bullish outlooks for home values in the Zillow survey’s history. On average, panelists expect home values to grow another 6.6 percent this year, and by 23.5 percent over the coming five years.
“Although a handful of experts foresee a modest price correction on the horizon, none expect a crash, even as the confluence of unusual forces impacting U.S. housing markets continues to generate significant uncertainty,” Pulsenomics founder Terry Loebs said.
Loebs said the range of home price predictions from panel participants is the widest he’s ever seen. The most optimistic group of experts expects more than 37 percent cumulative home value appreciation through 2026, while the most pessimistic group expects a gain of less than 8 percent over the same period.