The housing market has had an outstanding year, with record low-interest rates, the strongest yearly growth in single-family home prices and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years. However, will the housing market crash in 2022? Let's look at the most recent trends and housing market predictions for 2022. In 2021, homeowners saw a market in which their properties sold rapidly and frequently above the asking prices, as numerous home buyers fought for the winning bid.
Mortgage rates at record lows and a lack of available inventory have been sustaining the US housing market's demand. The Covid-19 pandemic threw the home-buying process into disarray. In 2020, the number of home sales increased significantly and surpassed 2007 levels. Despite the economic uncertainty caused by the pandemic, many buyers took a more serious approach to homeownership than ever before. It resulted in a massive, but brief, increase in homeownership as a result of drastically reduced spending.
One of the most widely held housing market predictions for 2022 is that inventory will remain scarce but price appreciation will be slower than it was this year. While spring and summer of 2022 will likely see an increase in listings, it is unlikely that there will be enough to meet demand. The housing market has been particularly robust in 2021, with high demand for homes in almost every area of the nation. The same trend will follow in 2022.
Mortgage rates at an all-time low combined with a shortage of inventory have created a red-hot housing market, with homes selling within hours of being listed, frequently for well over the asking price. Realtors are now forecasting full-year sales of more than 6 million, the highest number of sales since 2006. According to many housing experts, buyers can predict similar trends in 2022 to those seen over the last two years: increased prices, low inventory, and quick turnaround.
Housing Market 2022 Predictions & Forecasts
2022 will remain a sellers' housing market and home values are expected to increase by double-digit percentage points. While affordability concerns continue to grow, low mortgage rates, increased savings, and a strengthening job market all contribute to making homeownership more accessible to a wide number of prospective buyers. According to the most recent housing market forecast (by realtor.com), home price growth will slow further in 2022 but will continue to rise. As housing costs continue to consume a greater portion of home purchasers' paychecks, buyers will become more inventive.
Many will take advantage of continued workplace flexibility to relocate to the suburbs, where many can still find homes at a lower price per square foot than in nearby cities. Along with this outward push, we anticipate that some buyers will relocate entirely, and in our Top Housing Markets for 2022, we anticipate continued growth in the mountains west. Along with lower density and activities that contribute to a high quality of life, these markets have growing technology sectors and remain more affordable than more traditional tech hubs.
The housing market has made an amazing comeback in the fourth quarter of 2021, following two consecutive quarters of decreases. November 2021 saw a continuation of the upward trend, with existing house sales increasing by 1.9 percent month over month. Existing home sales increased little in November, and following a volatile year, the seasonally adjusted, annualized rate of sales is set to conclude 2021 roughly where it began. Monthly appreciation slowed slightly more in November, which might attract more buyers.
However, for-sale inventories (housing supply) also decreased last month, suggesting that the increase in sales may be modest. Looking at the current trends, the existing home sales will rise in 2022 as a result of low mortgage rates, a strong labor market, and moderated house price growth. The typical U.S. home was worth $316,368 in November 2021, up 19.3% from a year ago – a new high in Zillow’s records.
Home value growth is trending upward in most large markets, while inventory is trending downward, implying a more competitive market this winter. The annual rate of growth is an all-time high in data dating back more than 20 years, and the monthly rate is higher than at any point prior to the pandemic — though it is still significantly lower than the all-time high of 2% set in July.
The real estate market has emerged as a boon for sellers and a source of worry for buyers in the middle of this epidemic. Home prices have been increasing in the mid-single digits for many years. Recent double-digit price rises reflect the convergence of exceptional demand and chronically low supply. Prices are increasing as a result of enough money on the sidelines and very low mortgage rates. The improving economy and the approaching peak homebuying years of millennials are driving a residential housing boom.
The housing supply is now at its lowest level since the 1970s, due to millennial homeownership and other factors such as rising building prices and real estate speculators snapping up starter homes. The Census Bureau has released its most recent quarterly report, which includes data through the third quarter of 2021. Seasonally adjusted, the homeownership rate for Q3 is 65.4 percent, down from 65.4 percent in Q2. Additionally, the nonseasonally adjusted Q2 figure is 65.4 percent, which is unchanged from the Q2 2021 figure.
Low mortgage rates, coupled with more work-from-home possibilities created by the pandemic, have also fuelled a rise in housing demand, especially in lower-density suburbs. Detached single-family houses continue to be in great demand. These properties provide greater living space and separation from adjacent houses than attached properties provide.
Buying activity, as measured through mortgage loan application volume, increased for the third consecutive week in November, indicating that housing demand remains robust, despite the approaching traditionally slower holiday season. Loan applications for both conventional and government financing increased as well.
Will the housing market crash in 2022? Here is when real estate prices are going to crash. While this may appear to be an oversimplification, this is how markets operate. When demand is satisfied, prices fall. In many housing markets, there is an extreme demand for properties at the moment, and there simply aren't enough homes to sell to prospective buyers. Home construction has been increasing in recent years, but they are so far behind to catch up. Thus, in order to see significant declines in home prices, we would need to see significant declines in buyer demand.
Demand declines primarily as a result of rising interest rates or a slowing economy in general. Thus, there will be no crash in home prices; rather, there will be a pullback, which is normal for any asset class. The home price growth in the United States is forecasted to just “moderate” or slow down in 2022. The year 2022 is expected to be a healthy one for the housing market.
Mortgage rates are expected to increase somewhat but stay historically low, home sales will reach a 16-year high, and price and rent growth will drop significantly compared to 2021. Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than in 2021. Zillow predicts home prices will end 2021 a whopping 19.5% higher than the end of 2020.
With 10 years having now passed since the Great Recession, the U.S. has been on the longest period of continued economic expansion on record. The housing market has been along for much of the ride and continues to benefit greatly from the overall health of the economy. However, hot economies eventually cool and with that, hot housing markets move more towards balance. Housing market forecasts are essentially informed guesses based on existing patterns.
While the real estate pace of 2021 appears to be reverting to seasonality as we approach 2022, demand is not waning. Increasing interest rates will almost certainly have a greater impact on the national housing market in the early months of 2022 than any other factor. While sellers remain in an advantageous position, price stability and the continuation of competitive interest rates may provide some much-needed relief to buyers in 2022. Housing supply is and will likely remain a challenge for some time as labor and material shortages, as well as general supply chain issues, delay new construction.
The latest housing market trends show that prices are rising in most parts of the country and most price segments because of the lack of supply. Economic activities are ramping up in all the sectors, mortgage rates are rising, and jobs are also recovering. As of now, low mortgage rates are providing opportunities for buyers to lock in low monthly mortgage payments for future years.
In November 2021, the housing market is demonstrating signs of rebalancing, as evidenced by a steady pace of transactions and more moderate price growth. For the last four months, listing price growth has stayed consistent, more homeowners intend to sell in the next six months, and single-family house development continues at a faster pace than in recent history.
Homes remain on the market for longer periods of time. Despite this, buyers must be prepared to act quickly, even if they get a few additional days to decide. The housing market remains largely a seller's market due to demand still outpacing supply. The inventory of available houses continues to be a constraint on both buyers and sellers.
Forecasting home price appreciation is a challenging task. While inventory has increased slightly, it remains significantly below pre-pandemic levels and is simply unable to meet current demand. The latest housing news has Zillow revising its 2022 real estate forecast. The real estate listing site now claims that their previous forecast was too pessimistic. They have released another bullish housing market forecast in December, predicting that home prices in the United States would rise 11 percent in the next year.
That’s down from a forecast of 19.5 percent in 2021, a record year-end pace of house value gain, but would rank among the greatest years Zillow has monitored. Existing home sales are anticipated to total 6.35 million, compared to an estimated 6.12 million this year. That would be the largest amount of home sales in any year since 2006. Tight supply following years of underbuilding, combined with increased demand due to remote work, US demographics, and low mortgage rates — will continue to be a factor in 2022. It will continue to be a seller's real estate market in 2022.
Expect to see bidding wars on a number of houses, especially as the spring and summer shopping seasons approach. Existing home sales are expected to end in 2021 up strongly from 2020 and only continue growing through 2022. They currently forecast 6.13 million existing-home sales to close in 2021, up 8.6% from 2020 and also up slightly from their previous forecast of 6.12 million sales this year. Housing sales are expected to rise further in 2022, with more than 6.5 million closed existing home sales, a 6.5 percent increase over 2021.
The annual home value growth is likely to peak and plateau in the early months of 2022 before slowing somewhat through the end of next year. Zillow's near-term, three-month forecast is largely unchanged from the 3.8% growth expected previously from October to January. Over the longer term, however, their forecast for home value growth has risen: Zillow expects home values to grow 14.3% over the 12 months ending November 2022, up from 13.6% growth over the twelve months ending October 2022 that they projected last month.
The robust long-term outlook is driven by the expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes. While Zillow's housing market forecast is bullish, it is also a bit of an outlier when compared to CoreLogic's forecast. The CoreLogic Home Price Index Forecast has the annual average rise in the national index slowing from 15% in 2021 to 6% in 2022. Homes for sale should stay on the market a little longer with fewer people competing for them, which should keep prices from rising too quickly.
On the other hand, Freddie Mac's housing market prediction is more bullish than Zillow's. The FMHPI is an indicator for typical house price inflation in the United States. It indicated that home prices increased by 11.3 percent in the United States in 2020 as a result of robust housing demand and record low mortgage rates. According to their recent housing market forecast, house value growth in 2022 will be less than half of what we've witnessed so far this year.
The increase in house price growth will be less transitory than the increase in consumer prices, as the U.S. housing market will continue to struggle with a shortage of available housing for many months to come. Growth is expected to slow to 7 percent in 2022, according to their latest forecast. The pace of home sales has cooled since the first quarter of 2021 when it was at 7.2 million. Freddie Mac predicts home sales to hit 6.8 million for the full years 2021 and 2022. Additionally, they forecast house price growth of 16.9% in 2021. However, they expect house price growth to slow to 7.0% in 2022.
Strong house price growth is expected to lift home purchase mortgage originations from $1.9 trillion in 2021 to $2.1 trillion in 2022. With a higher mortgage rate forecast for 2022, they anticipate refinancing activity to soften, with refinancing originations declining from $2.6 trillion in 2021 to just below $1.0 trillion in 2022. Overall, Freddie Mac predicts that total originations will decline from $4.5 trillion in 2021 to $3.1 trillion in 2022.
Redfin's chief economist forecasts that 30-year fixed mortgage rates will gradually rise from around 3% to around 3.6 percent by the end of the year, owing to the pandemic subsiding and inflation persisting. By late fall, the combination of high mortgage rates and already-high housing prices will likely slow annual price growth to around 3%. This low rate of price growth is likely to deter speculators from entering the market, giving first-time homebuyers a better chance of obtaining a home.
A respite of this kind means a return to normalcy in 2022. If you look at America’s house price history, they tend to rise over the long term, between 3% and 5% every year. According to Black Knight, a real estate and mortgage data analytics company, annual home price growth has seen a 25-year average of 3.9%. In 2019, the average annual price gains marginally decreased to 3.8 percent, the first time since 2012 they have decreased. The significant double-digit gains witnessed over the last year are an exception caused by an overheated US housing market.
Such quick price increases are typically unsustainable in the long run, as they exhaust many potential homebuyers. A 7.4 percent gain in home prices would be more in line with historical trends. If you're wondering what the state of the housing market will be like over the next six months, especially if you're an investor, then here is some good news for you. The mismatch between supply and demand is driving prices higher, but this isn't a housing bubble.
Many experts were predicting that the pandemic could lead to a housing crash worse than the great depression. But that's not going to happen. The market is in much better shape than a decade ago. The housing market is well past the recovery phase and is now booming with higher home sales compared to the pre-pandemic period. The US housing market is ripe for investment in 2022, making it a great time to buy an investment property to increase your cash flow.
A multi-generational housing market is creating limited supply and increased competition, driving up prices at the affordable end of the market for the foreseeable future. In hot job markets and communities that fit the youngest generation’s ideals, price increases of 8-15 percent are possible year-over-year. Real estate is appreciating at or just above the rate of inflation. You will find sellers' markets in most regions of the country, so you need to prepare for real estate investing accordingly.
Find the best investment property for sale and try to get pre-approved for financing well in advance. Paying a mortgage on a home can serve as a forced savings account and help you build equity over time. Lastly, take the help of a good real estate agent/broker to write a great purchase offer and beat out the competition. Real estate activity has been going on at an unusual pace. The housing sales recovery is strong, as buyers are eager to purchase homes and properties that they had been eyeing during the shutdown.
As the population of millennials is increasing, the demand side of housing remains strong. Many buyers need to get into a larger home because they have a growing family. Those interested in purchasing homes are looking at the enticing low mortgage rates. Housing inventory will remain low, despite plenty of new construction the number of homes for sale would still fall well short of demand in 2022. Buyers will stay focused on the suburbs. We can expect a wave of mortgage refinances to save money.
Buying a home in a seller’s market can feel like you’re losing money. Demand is robust throughout the country, but many homebuyers continue to be held back by the lack of homes for sale and rapidly increasing home prices. You may just wait a few months or even a year so that prices will flatten (or come down). The problem is that prices could keep rising to the point where you’re priced out of the market. There’s no guarantee either way. You can opt to refinance at today’s rates to at least cut your monthly mortgage payments. The present scenario makes it appealing to buyers who have been spending all this money on rent.
Earlier this year, Realtor.com's housing market forecast for 2021 had predicted that the housing boom will continue but the seasonal trends will normalize. Their latest housing forecast for 2022 predicts that the market will continue to cool following the spring frenzy that saw prices soar to unprecedented heights. Prices, on the other hand, will remain high, inventory will remain scarce, and mortgage rates will climb.
Realtor.com's Home Price Forecast 2022
- Home sales prices are expected to continue rising, resulting in a decade-long string of year-over-year gains beginning in early 2022.
- Looking ahead, Realtor.com anticipates that with economic growth projected to sustain enthusiastic purchasers' spending power, the median home sales price will continue to rise, gaining 2.9 percent in 2022, a somewhat slower rate.
- Homebuyers will face increased monthly costs as a result of rising prices and borrowing rates.
- Affordability constraints will prevent prices from increasing at the same rate as they did in 2021, even as supply-demand factors continue to drive prices upward nationwide.
- The housing market will remain competitive for buyers in 2022, particularly those looking for homes in entry-level price tiers.
- Numerous protective buyers (millennials) imply rising property prices, which, when paired with rising mortgage rates, would result in greater monthly payments for buyers.
Home Sales Forecast 2022
- At a national level, this means we expect to see continued home sales growth in 2022 of 6.6% which will mean 16-year highs for sales nationwide and in many metro areas.
- With almost 45 million millennials between the ages of 26 and 35 who are prime first-time homebuyers in 2022, housing demand is likely to continue strong.
- 2022 is expected to have the 2nd highest sales level in the last 15 years, bested only by 2021.
- 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.
Housing Supply Forecast 2022
- With homes continuing to sell at a rapid pace, inventory will remain constrained, but they expect the market to recoup from its 2021 lows.
- Inventory is predicted to expand by an average of 0.3 percent in 2022.
- With 28% of homeowners deciding not to sell stating that they are unable to find a new house to purchase, an increase in inventory could be self-reinforcing, attracting additional potential sellers as they find properties to purchase.
- The increased new construction will eventually contribute to this upward tendency as well.
- Even as for-sale inventory increases, creating competition for some sellers, well-priced homes in good condition will continue to sell rapidly in many regions.
Housing Rent Forecast 2022
- Renters will see increasing rents in 2022.
- The rental vacancy rate has remained at its epidemic lows (between 5.7 percent and 6.8 percent).
- In 2022, they forecast that this tendency will continue, resulting in continued rent growth.
- Nationally, the rent growth of 7.1 percent is forecasted over the next 12 months, slightly ahead of home price growth, as rents continue to recover from earlier in the pandemic's slower rise.
Real Estate Investment Forecast 2022
- In 2022, investors will continue to earn a healthy return on their housing market investments.
- Existing homeowners are in a strong position, and rising rents are likely to tempt investment buyers to continue purchasing properties even as mortgage rates climb.
- In the spring of 2021, investors purchased more properties than they sold, and this investor surge persisted into the summer.
- If these homes are rented, 2022 will be an ideal year to earn a high return due to strong demand and predicted increases in rental prices.
According to Zillow, the housing market forecast for 2022 has improved but lingering economic uncertainty may temper some of the predictions. The forecasts for seasonally adjusted home prices and pending sales are more optimistic than previous forecasts because sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
The pandemic also pushed the buying season further back in the year, adding to recent sales. Future sources of economic uncertainty, including lapsed fiscal relief, the long-term fate of policies supporting the rental and mortgage market, and virus-specific factors, were incorporated into this outlook.
- Their bullish long-term outlook is based on their expectation that tight market conditions will persist, with housing demand exceeding supply.
- Zillow expects home values to grow 13.6% between October 2021 and October 2022, and to end 2021 up 19.5% from December 2020.
- Home values are expected to grow 3.8% in the three-month period from October to January 2022.
- The near-term, three-month forecast is slightly lower than the 4.4% growth expected previously from September to December.
- Existing home sales are expected to total 6.12 million in 2021, up 8.5% from 2020.
- Also up from their previous forecast of 6.04 million sales this year.
- Zillow also increased its longer-term sales forecast, in part due to changes in home affordability.
- While rapidly rising home prices pose affordability challenges for many, low mortgage rates have kept monthly payments manageable for those with a down payment.
Forecast For The Hottest Housing Markets For 2022
Realtor.com’s top 10 housing markets for 2022 have substantial momentum from 2021 which they will carry into 2021. Salt Lake City will lead the pack for home price appreciation and sales growth. These metros are in a prime position to see an uptick in home sales and rising prices in 2022. Low mortgage rates throughout most of this year helped these markets see price and sales growth on top of 2020’s high levels. Economic momentum coupled with healthier levels of supply will position these markets for growth in 2022.
Boise ranks number two. Boise home prices are predicted to increase by 7.9 percent while sales will increase by 12.0 percent. Spokane Valley ranks at #3 where the median home price is expected to rise 7.7 percent in 2022. Harrisburg, Indianapolis came in at No. 4 on the list. Its relative affordability will boost the sales by 14.8% in 2022 while the median will grow at a modest rate of 5.5%.
Here are the top 5 housing markets in 2022 forecasted by Realtor.com:
1. Salt Lake City, Utah
- Median home price: $564,062
- Project home price increase: 8.5%
- Projected increase in home sales: 15.2%
- Combined sales and price growth: 23.7%
2. Boise City, Idaho
- Median home price: $503,959
- Project home price increase: 7.9%
- Projected increase in home sales: 12.9%
- Combined sales and price growth: 20.8%
3. Spokane-Spokane Valley, Washington
- Median home price: $419,803
- Project home price increase: 7.7%
- Projected increase in home sales: 12.8%
- Combined sales and price growth: 20.5%
4. Indianapolis-Carmel-Anderson, Indiana
- Median home price: $272,401
- Project home price increase: 5.5%
- Projected increase in home sales: 14.8%
- Combined sales and price growth: 20.3%
5. Columbus, Ohio
- Median home price: $298,523
- Project home price increase: 6.3%
- Projected increase in home sales: 13.7%
- Combined sales and price growth: 20%
Latest Housing Market 2022 Trends: Prices, Sales, Inventory
We'll examine current real estate trends, including price and rent increases, housing sales and supply, mortgage rates and delinquencies, and other key industry takeaways and insights into the US housing market. According to N.A.R, an increasing gap between supply and demand will cause home prices to increase and we can expect further upward pressure on prices for the foreseeable future.
According to Yun, with mortgage rates to remain low, existing-homes sales are projected to rise by 10% in 2021 to reach 6.2 million in 2021, while the median home price is anticipated to increase by 9% in 2021 to $323,900. Housing starts are forecasted to reach 1.6 million in 2021 and 1.7 million in 2022, providing much-needed relief to the housing inventory deficit.
According to Bankrate’s latest survey of the nation’s largest mortgage lenders, as of January 13th, 2022, the average rate for a 30-year fixed mortgage is 3.50 percent, up 15 basis points over the last seven days. This time a month ago, the average rate on a 30-year fixed mortgage was lower, at 3.25 percent. The average 15-year fixed-mortgage rate is 2.82 percent, up 20 basis points since the same time last week.
- At the current average rate, you’ll pay $447.93 per month in principal and interest for every $100,000 you borrow.
- That’s an increase of $13.27 over what you would have paid last week.
- Monthly payments on a 15-year fixed mortgage at that rate will cost roughly $409 per $100k borrowed.
Note: The larger payment may be more difficult to fit into your monthly budget than a 30-year mortgage payment, but it comes with some significant benefits: you'll save thousands of dollars in total interest paid over the life of the loan and build equity much faster.
How Mortgage Rates Have Shifted Over The Past Week
- 30-year fixed mortgage rate: 3.50%, up from 3.35% last week, +0.15
- 15-year fixed mortgage rate: 2.82%, up from 2.62% last week, +0.20
- 5/1 ARM mortgage rate: 2.74%, up from 2.73% last week, +0.01
- Jumbo mortgage rate: 3.51%, up from 3.36% last week, +0.15
Mortgage experts mostly think rates will rise in the coming week. In response to Bankrate's weekly poll, 50 percent said rates will go up. Meanwhile, 50 percent said they would hold steady and none predicted they would fall. The Fed announced that they will be doubling the speed of their tapering of asset purchases and will stop buying Treasurys and mortgage-backed securities by March. This is an announcement that markets were expecting. But this will still put upward pressure on rates in the coming week. I expect higher mortgage rates in the coming week.
Even with rising mortgage rates and higher prices, the housing market should remain strong due to very tight inventories and increasing demand as more millennials are projected to buy houses this year. Now millennials make up the largest share of homebuyers in the US, according to a 2020 survey from the NAR. According to a new study by Realtor.com, buying is more cost-efficient than renting in a growing number of the largest cities in the country. This is encouraging news for the millions of millennials who are approaching peak homebuying age.
Only 26 percent of respondents to “Fannie Mae’s December 2021 National Housing Survey” said it was a good time to buy a home, down from 29 percent last month. On the other hand, 66 percent of respondents said it’s a bad time to buy a home, up from 64 percent last month. As a result, the net share of those who say it is a good time to buy decreased 5 percentage points month over month. In December, a record-low 26% of consumers reported that it’s a good time to buy. By comparison, in December 2020, 50% of respondents believed it was a good time to sell, while 52% believed it was a good time to buy. Year over year, the full index is up 0.2 points.
Seller sentiment increases as 76 percent of respondents said they believed it was a good time to sell a home, up from 74 percent last month, while the percentage who say it’s a bad time to sell decreased from 21% to 17%. As a result, the net share of those who say it is a good time to sell increased 6 percentage points month over month.
The percentage of respondents who say home prices will go up in the next 12 months decreased from 45% to 44%, while the percentage who say home prices will go down decreased from 21% to 19%. The share who think home prices will stay the same increased from 28% to 30%. As a result, the net share of Americans who say home prices will go up increased 1 percentage point month over month.
The percentage of respondents who say mortgage rates will go down in the next 12 months decreased from 5% to 4%, while the percentage who expect mortgage rates to go up decreased from 58% to 56%. The share who think mortgage rates will stay the same decreased from 32% to 30%. As a result, the net share of Americans who say mortgage rates will go down over the next 12 months increased 1 percentage point month over month.
Existing-Home Sales Increased 1.9% in November From October 2021
According to the National Association of Realtors®, existing-home sales increased in November, denoting three consecutive months of increases. Two of the four major U.S. regions saw month-over-month sales climb, one region reported a drop and the fourth area held steady in October. On a year-over-year basis, each region witnessed sales decrease. Three of the four major US areas recorded monthly sales growth in November, while the fourth region maintained its level.
Only one region witnessed an increase in sales year over year, while the other three saw declines. According to Lawrence Yun, chief economist at the National Association of Realtors, sales surged presumably as a result of a better employment market and concerns among potential buyers that mortgage rates will rise dramatically next year.
- November's existing-home sales rose 1.9% from October to 6.46 million (SAAR), according to the National Association of Realtors.
- Home sales were down 2% from November 2020.
- Regionally, month-to-month, sales in the Northeast were unchanged.
- In the Midwest, they rose 0.7% and in the South, they rose 2.9%.
- In the West, sales increased 2.3%.
- That tight supply continued to put upward pressure on home prices.
- The median price of an existing home sold last month was up 13.9% year-over-year, to $353,900.
- That is a 13.9% gain from November of 2020.
- Price gains are slowing from earlier annual gains of about 20%.
- Inventory of unsold homes decreased 13.3% to 1.1 million – equivalent to 2.1 months of the monthly sales pace.
- Sales were stronger in the more expensive categories, with homes priced between $750,000 and $1 million rising 37% year over year.
- Those priced above $1 million rose 50%.
- Comparatively, homes priced between $100,000 and $250,000 fell 19%.
- Supply is leanest on the lower end of the market.
- The proportion of sales to first-time purchasers was just 26%, down from 32% in November 2020.
- Investors accounted for 15% of sales, up from 14% the previous year.
The South accounted for over half of all the sales in November, accounting for 44 percent, followed by the Midwest at 23 percent and the West at 21 percent, with the Northeast accounting for only 12 percent. The highest sales were seen in the price segment of $250,000 to $500,000. This price range accounted for 43% of total home sales seen in November. The price segment of $100,000 to $250,000 range accounted for 24% of total home sales.
The current supply of homes on the market remains historically low. With the recovering economy, more buyers are entering the market. And, because there is still a limited supply of housing inventory, home prices continue to rise even in a low-interest-rate scenario. With increased supply, home price growth will gradually moderate, but a broad price decline is unlikely. The housing market will continue to attract buyers as a result of the drop in mortgage rates as well as an increase in new listings.
Existing Housing Sales in November 2021
(Regional Breakdown By N.A.R.)
|Northeast||Existing-home sales were flat compared to the prior month, neither climbing nor falling in November and recorded an annual rate of 760,000, which is an 11.6% decrease from November 2020.|
|The median price in the Northeast was $372,500, up 4.7% from one year ago.|
|Midwest||Existing-home sales ticked up 0.7% to an annual rate of 1,520,000 in November, a 0.7% drop from a year ago.|
|The median price in the Midwest was $260,100, a 9.0% jump from November 2020.|
|South||Existing-home sales grew 2.9% in November, registering an annual rate of 2,850,000, a rise of 1.1% from one year ago.|
|The median price in the South was $318,900, an 18.4% surge from one year prior.|
|West||Existing-home sales increased 2.3%, reaching an annual rate of 1,330,000 in November, down 3.6% from one year ago.|
|The median price in the West was $507,200, up 8.4% from November 2020.|
New Home Sales Increased in October 2021
The Commerce Department reported Wednesday that new home sales in the United States increased 0.4 percent in October to a seasonally adjusted annual rate of 745,000 from 742,000 the previous month. Because of the small sample size, sales figures are frequently revised sharply. The initial estimate for September sales was 800,000.
In October, the median sales price of new houses sold was $407,700, setting a new high. Between September and October, the supply of new homes for sale increased by 3.3 percent, resulting in a 6.3-month supply. Regionally, sales were strong in the Midwest, slightly higher in the South, and lower in the Northeast and West.
For homebuyers who were dissatisfied with this year's extremely limited supply of existing homes, new construction may appear to be an appealing alternative. At the end of October, the seasonally adjusted estimate of new houses for sale was 389,000. At the current sales rate, this equates to 6.3 months of supply.
Housing Construction Trends & Homebuilder Confidence
The NAHB also gets input from builders on how confident they are in the housing market based on buyer behavior, sales, and incorporates any forecasts as well. Building permits have recovered from epidemic lows, and builders are scrambling to close the supply-demand imbalance. They are still optimistic a year after the Covid epidemic brought home development to a halt. Because the current house market continues to suffer from a record low number of listings, they are seeing high demand from potential purchasers.
It is becoming increasingly difficult for them to meet this housing demand due to supply delivery issues and rising material costs. NAHB Housing Market Index (HMI) is a gauge of builder opinion on the relative level of current and future single-family home sales. It is a diffusion index, which means that a reading above 50 indicates a favorable outlook on home sales; below 50 indicates a negative outlook.
Builder sentiment in the market for newly-built single-family homes moved three points higher to 83 in November. Low existing inventories and strong buyer demand boosted builder confidence for the third month in a row, even as supply-side challenges such as building material bottlenecks and lot and labor shortages persisted.
The HMI index gauging current sales conditions rose three points to 89 and the gauge charting traffic of prospective buyers also posted a three-point gain to 68. The component measuring sales expectations in the next six months held steady at 84. Looking at the three-month moving averages for regional HMI scores, the Midwest rose four points to 72, the South registered a four-point gain to 84 and the West rose one point to 84. The Northeast fell two points to 70.
“The solid market for home building continued in November despite ongoing supply-side challenges,” said NAHB Chairman Chuck Fowke. “Lack of resale inventory combined with strong consumer demand continues to boost single-family home building.”
In 2021, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million. And that could just be the beginning, as projections going forward are even rosier: 1.165 million single-family homes in 2022 and 1.210 million in 2023. New home builders will ramp up production to help relieve the shortage of inventory of homes for sale throughout the United States. The added inventory would no doubt aid buyers in their search to secure their dream home, while also helping to ease price increases throughout the country.
According to Urban Land Institute, real estate market conditions and values in the U.S. are expected to rebound in 2021 and trend even higher in 2022, with single-family homes outperforming other sectors such as commercial, retail, hotel, and rental. Home prices will grow an average of 4.1% over the next three years, above the long-term average of 3.9%, according to the report, based on a survey of 43 economists at 37 leading real estate organizations.
Housing Market Monthly Trends: Price Growth Remains Steady in December 2021
Before the pandemic, the housing market was remarkably strong. The coronavirus crisis response was unprecedented. The federal government ordered a de facto shutdown of the entire private economy, closing an estimated eighty percent of businesses. It has caused unemployment to soar to at least ten percent, while tens of millions are idled. We are now in a period where we can compare housing trends against the early days of the pandemic when the real estate market was largely halted.
Back in March of last year, the real estate market looked to be headed into a steep decline due to widespread stay-home orders. Since then, homebuyers, supported by low-interest rates, have kept the US housing market afloat. The pandemic has certainly affected every sector but the residential real estate market has been very resilient and it continues to be a pillar of support for the economy. The housing market bounced back in 2020 much faster than other sectors of the economy and has sustained that growth and pace into 2021.
2020 was a record-breaking year for the US housing market. The typical U.S. home was worth $266,104 in December, up 8.4% (or $20,587) from a year ago. A total of 5.64 million homes were sold in 2020, up 5.6% from 2019 and the most since before the Great Recession, according to Lawrence Yun, NAR’s chief economist. Sales also rose 0.7% from November and 22.2% year over year. Existing home sales reached the highest level in 13 years.
While we still face economic and health challenges ahead, it is no doubt that the nation will continue to recover from this pandemic and an improving economy will continue to prop up the housing market competition. Industry experts believe the housing market will remain strong and is set to break more records in 2021.
This time the housing market is largely being driven by two factors: a shortage of available housing inventory and extremely low-interest rates. Double-digit annual growth in both list and sale prices shows an extreme lack of inventory and incredible demand — A sign of a seller's real estate market.
The housing market is still hot, but we may be starting to see rising home prices hurting affordability unless the mortgage rates continue to decline in 2021. Additionally, even if mortgage rates help blunt the effects of higher home prices on monthly payments, they don’t offset the need for larger down payments and other closing costs as home prices rise.
Mortgage applications increased 1.8 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending November 19, 2021.
- The Market Composite Index, a measure of mortgage loan application volume, increased 1.8 percent on a seasonally adjusted basis from one week earlier.
- The Refinance Index increased 0.4 percent from the previous week and was 34 percent lower than the same week one year ago.
- The refinance share of mortgage activity increased to 63.1 percent of total applications from 62.9 percent the previous week.
- The FHA share of total applications decreased to 8.6 percent from 8.9 percent the week prior.
- The VA share of total applications decreased to 10.3 percent from 10.8 percent the week prior.
- The USDA share of total applications decreased to 0.4 percent from 0.5 percent the week prior.
- The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.24 percent from 3.20 percent.
- The average contract interest rate for 30-year fixed-rate mortgages backed by the FHA increased to 3.27 percent from 3.23 percent.
- The average contract interest rate for 15-year fixed-rate mortgages increased to 2.59 percent from 2.56 percent.
According to Zillow, the current typical value of homes in the United States is $316,368. This value is seasonally adjusted and only includes the middle price tier of homes. In Nov 2020, the typical value of homes was $265,000. Home values have gone up 19.3% over the past year and Zillow predicts they will rise 14.3% over the next twelve months.
Realtor.com’s December 2021 real estate data points to a warmer month (by housing market standards, at least) than this fall, as buyers lock in rates ahead of what is typically a slower time of year. The growth rate of the national median listing price increased in December, as did the difference in time on the market, with homes spending 11 days less on the market than last year.
Inventory declines continued to accelerate, and price reductions – which had been increasing in share compared to last year for the previous four months – ended December at the same level as last year, indicating less need for price reductions to sell homes.
- In December, the nationwide median listing price for active listings was $375,000, an increase of 10 percent year over year and 25 percent compared to 2019.
- In large metros, median listing prices grew by 5.4% compared to last year, on average.
- Nationally, the inventory of active listings decreased by 26.8% year over year, while the overall inventory of unsold houses, including pending listings, decreased by 16.1%.
- The inventory of active listings is down 57.1% compared to 2019.
- Newly listed homes are down 6.1% nationally compared to a year ago, and down 7.6% for large metros over the past year.
- Sellers are still listing at rates 12.9% lower than typical 2017 to 2019 levels.
- Nationally, the typical home spent 54 days on the market in December, down 11 days from the same time last year and down 26 days from 2019.
|REGIONAL HOUSING MARKET STATISTICS – DECEMBER 2021|
|Region||Active Listing Trends YoY||New Listing Trends YoY||Median Listing Price YoY||Median Days on Market Trends YoY|
Housing Market Trends For Supply
Nationally, the inventory of homes for sale in December decreased by 26.8% over the past year, a larger rate of decline compared to the 26% drop in November. This decline amounted to 177,000 fewer homes actively for sale on a typical day in December compared to the previous year. Active inventory remains historically low. The total number of unsold homes nationwide–a metric that includes active listings and listings in various stages of the selling process that are not yet sold– is down 16.1% percent from December 2020.
In December, newly listed homes declined by 6.1% on a year-over-year basis following typical seasonal patterns. However, sellers are still listing at rates 12.9% lower than typical of 2017 to 2019 levels. This is the fourth consecutive month in which new seller activity has been lower than last year, contributing to lower inventory. New properties are coming on the market every week but are also being sold quickly. The total housing supply is not enough to mark it as a buyer’s real estate market and it is not equal to what is needed to relieve the historically tight home supply.
Housing inventory in the 50 largest U.S. metros overall decreased by 26.6% over last year in December, an increase in the rate of decline compared to last month’s 24.2% decrease. Regionally, the inventory of homes in western and southern metros are showing the largest year-over-year decline (-32.1% and -20.0%, respectively) followed by the Northeast (-24.8%), and Midwest (-16%).
Housing Markets that saw the largest year-over-year increase in newly listed homes in December:
- Memphis, where newly listed homes grew by +22%
- Pittsburgh, where newly listed homes grew by +10.9%
- Philadelphia, where newly listed home grew by +10.8%
The only housing Markets that saw the year-over-year decrease in newly listed homes in December:
- San Francisco, where newly listed homes declined by -27.6%
- Hartford, where newly listed homes declined by -26.6%
- Raleigh, where newly listed homes declined by -24.1%
According to the National Association of Realtors®, the total housing inventory at the end of November amounted to 1.11 million units, down 9.8% from October and down 13.3% from one year ago (1.28 million). Unsold inventory sits at a 2.1-month supply at the current sales pace, a decline from both the prior month and from one year ago.
Housing Market Trends For Median Listing Prices
Realtor.com's data shows that the median national home listing price declined from $379,000 in November to a seasonal low of $375,000 in December. The median listing price again grew by 10.0% over last year, an acceleration from the annual rate of 8.6% in November. This acceleration breaks the trend of 8 to 9 percent growth seen since August. As previously stated, while median listing price increase has slowed to single digits, this trend reflects a shift in the inventory mix available for sale this year, with more small homes available for sale this year. The median listing price of a typical 2,000 square-foot single-family house is up 18.6 percent year over year.
Housing Price Trends: National Listing Price Growth in 2021
|In January 2021, the median national home listing price grew by 15.4 percent year-over-year to $346,000.|
|In February 2021, the median national home listing price grew by 13.7 percent year-over-year to $353,000.|
|In March 2021, the median national home listing price grew by 15.6 percent year-over-year to $370,000.|
|In April 2021, the median national home listing price grew by 17.2 percent year-over-year to $375,000.|
|In May 2021, the median national home listing price grew by 15.2 percent year-over-year to $380,000.|
|In June 2021, the median national home listing price grew by 12.7 percent year-over-year to $385,000.|
|In July 2021, the median national home listing price grew by 10.3 percent year-over-year to $385,000.|
|In August 2021, the median national home listing price grew by 8.6 percent year-over-year to $380,000.|
|In September 2021, the median national home listing price grew by 8.6 percent year-over-year to $380,000.|
|In October 2021, the median national home listing price grew by 8.6 percent year-over-year to $380,000.|
|In November 2021, the median national home listing price grew by 8.6 percent year-over-year to $379,000.|
|In December 2021, the median national home listing price grew by 10.0 percent year-over-year to $375,000.|
Asking prices in the nation’s largest metro housing markets grew by an average of 5.4% compared to last year. Price growth in the nation's largest metros is slowing slightly lower than in other areas, but the primary reason is new inventory bringing relatively smaller homes to the market.
Housing Markets that saw the largest year-over-year increase in listing prices in November:
- Las Vegas, where median listing price grew by +32.4%
- Austin, where median listing price grew by +28.8%
- Tampa, where median listing price grew by +25.4%
Housing Markets that saw the greatest increase in their share of price reductions compared to last year:
- Austin (+3.4 percentage points)
- Pittsburgh (+3.2 percentage points)
- Buffalo (+2.1 percentage points)
Housing Market Trends For Median Sales Prices
According to the National Association of Realtors®, the median existing-home price for all housing types in November was $353,900, up 13.9% from November 2020 ($310,800), as prices increased in each region, with the highest pace of appreciation in the South region. This marks 117 straight months of year-over-year increases, the longest-running streak on record. The median existing single-family home price was $362,600 in November, up 14.9% from November 2020. The median existing condo price was $283,200 in November, an annual increase of 4.4%.
Housing Sales Trends 2021
Homes for sale in December continued to sell more quickly than last year, as buyer demand remained on a strong footing. The average home stayed on the market for 54 days, down 11 days from last year. Despite the typical seasonal slowdown, homes sold faster than in any other December in recent history, and even faster than during previous summer seasonal peaks.
In the 50 largest U.S. metros, the typical home spent 48 days on the market, and homes spent 7 days less on the market, on average, compared to last December. Among these 50 largest metros, the time a typical property spends on the market has decreased most in large metros in the South (-9 days), followed by the West (-6 days), Midwest (-5 days), and Northeast (-5 days).
Homes saw the greatest decline in time spent on the market compared to last year in:
- Miami (-31 days)
- Orlando (-19 days)
- Raleigh (-18 days)
Only Hartford homes saw time on the market increase, by just five days. However, time on the market in Hartford is shorter than typical levels seen this time of year in 2019 and earlier.
Total existing-home sales that include single-family homes, townhomes, condominiums, and co-ops, grew 1.9% from October to a seasonally adjusted annual rate of 6.46 million in November, according to the National Association of Realtors®. However, sales fell 2.0% from a year ago (6.59 million in November 2020).
Distressed sales – foreclosures and short sales – represented less than 1% of sales in November, equal to the percentage seen a month prior and equal to November 2020. First-time buyers were responsible for 26% of sales in November, down from 29% in October and from 32% in November 2020. Individual investors or second-home buyers, who make up many cash sales, purchased 15% of homes in November, down from 17% in October and up from 14% in November 2020.
All-cash sales accounted for 24% of transactions in November, equal to October’s percentage, and up from 20% from November 2020. Single-family home sales rose to a seasonally adjusted annual rate of 5.75 million in November, up 1.6% from 5.66 million in October and down 2.2% from one year ago. Existing condominium and co-op sales were recorded at a seasonally adjusted annual rate of 710,000 units in November, up 4.4% from 680,000 in October and equal to one year ago.
Will The Housing Market Crash Due To The Foreclosures?
Is there going to be a housing market crash in 2022? What a difference a pandemic like Covid makes on the housing market, which advances in the opposite direction of what one would expect in a recession! We are unlikely to see a housing market crash similar to the one that occurred during the 2008 housing bubble. We do see the momentum cooling over the next year. The economic factors resulting in that housing crash were much different than today. Here's an overview of how to think about a potential housing market crash and the factors that affect real estate cycles.
Early on in the COVID-19 crisis, it appeared that the housing market might collapse. Instead, a housing boom has occurred with the median home prices rising by an astounding 24 percent since the crisis began. The mortgages backed by the federal government were exempted from the foreclosure moratorium. It kept the housing market afloat during the crisis. To help borrowers at risk of losing their homes due to the coronavirus national emergency, FHFA announced that Fannie Mae and Freddie Mac (the Enterprises) are extending the moratoriums on single-family foreclosures and real estate owned (REO) evictions until June 30, d2021.
On June 24th, the Biden administration extended the foreclosure moratorium for a final, additional month until July 31, 2021, and the forbearance enrollment window through September 30, 2021, and provided up to three months of additional forbearance for certain borrowers. It will avert the displacement of foreclosed borrowers and other occupants who need more time to access suitable housing options after foreclosure. The government’s moratoria have been effectively stopped foreclosure activity on everything but vacant and abandoned properties.
2020 ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity. There is a possibility of a backlog of foreclosures building up due to this moratorium and no one knows how big that backlog is going to be. The foreclosure backlog comprises three types of loans — loans that were in foreclosure before the government's moratoria; loans that would have defaulted under normal circumstances; and loans that would default due to job losses induced by the pandemic.
These actions were taken by three federal agencies that back mortgages – the Department of Housing and Urban Development (HUD), Department of Veterans Affairs (VA), and Department of Agriculture (USDA). The Federal Housing Finance Agency (FHFA) provided similar relief for mortgages backed by Fannie Mae and Freddie Mac. It has given relief to more than 28 million homeowners with an Enterprise-backed mortgage.
The foreclosure moratorium applied to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applied to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. These actions have prevented foreclosures and allowed some homeowners with government-backed loans to pause their mortgage payments for up to eighteen months.
The foreclosure crisis that followed the 2008 housing crash was exacerbated in part by the fact that tens of millions of financially stressed homeowners were underwater. This year, that is unlikely to be the case for heavily indebted homeowners. These homeowners are likely to have significant home equity, and if they are unable to repay their mortgage, they can simply sell into the current hot housing market. The buyer traffic is still moderately strong throughout most of the country, which is a great sign for these homeowners.
So, is this a Housing Bubble? A “housing bubble” is formed by the artificially and unsustainably high prices of an already hot housing market — like the one United States has been experiencing over months. The housing industry and its economic factors depend on supply and demand. The bubble starts forming when demand for property rises and supply begins to diminish, a combination that can only lead to price hikes. As inventories shrink, anxious buyers start paying even more money on properties that are already selling much beyond the market value.
Now the fear is that even if only a small percentage of the 1.75 million homeowners currently protected by the mortgage forbearance program choose to sell rather than repay their mortgage, it could have a significant impact on the historically tight housing market. There will be an increase in housing inventory which has a direct impact on the prices. However, because current inventory is at a 40-year low, we anticipate that home prices will continue to rise rapidly even if the forbearance program is terminated. Let's see what the comprehensive foreclosure data of the US housing market looks like.
With moratoria lifted, foreclosures begin to increase, but remain 80% below pre-pandemic levels; the delinquency rate falls to 4% for the first time since early 2020, according to Black Knight's First Look at August 2021 Mortgage Data.
- The national delinquency rate on first-lien mortgages fell to 4.00% in August, the lowest it’s been since pandemic-related impacts caused mortgage delinquencies to spike in early 2020.
- Serious delinquencies – including those in active forbearance – fell by 108,000 from July and, though down by more than 1 million from last August, are still roughly 930,000 above pre-pandemic levels.
- August’s 7,100 foreclosure starts represented the largest such volume in eight months after foreclosure moratoria on federally backed loans were lifted at the end of July.
- Despite the increase – which was driven primarily by restarting the process on loans that had been in foreclosure before the moratoria – start volumes remain 80% below August 2019 levels.
US Housing Foreclosure Statistics 2021
ATTOM Data Solutions, licensor of the nation's most comprehensive foreclosure data released its Q3 2021 U.S. Foreclosure Market Report. The United States' foreclosure activity increases significantly as the foreclosure moratorium is lifted. It shows that which shows there were a total of 45,517 U.S. properties with foreclosure filings — default notices, scheduled auctions, or bank repossessions — up 34 percent from the previous quarter and 68 percent from a year ago. Q3 foreclosure activity was 60 percent lower than the same quarter that year. Nationwide one in every 3,019 properties had a foreclosure filing in Q3 2021.
Lenders began foreclosure proceedings on 25,209 homes in the United States in Q3 2021, up 32% from the previous quarter and 67% from a year earlier – the first quarterly rise in double digits since 2014. Lenders repossessed 7,574 U.S. properties through foreclosure (REO) in Q3 2021, up 22 percent from the previous quarter and up 46 percent from a year ago the first quarterly increase since Q1 2016. Properties foreclosed in Q3 2021 had been in the foreclosure process an average of 924 days, up slightly from 922 days in the previous quarter but up 11 percent from 830 days in Q3 2020.
The following states had the highest number of foreclosure starts in Q3 2021:
- California (3,434 foreclosure starts)
- Texas (2,827 foreclosure starts)
- Florida (2,546 foreclosure starts)
- New York (1,363 foreclosure starts)
- Illinois (1,362 foreclosure starts)
The following metropolitan statistical areas had the highest number of foreclosure starts in Q3 2021:
- New York, New York (1,456 foreclosure starts)
- Chicago, Illinois (1,122 foreclosure starts)
- Los Angeles, California (1,102 foreclosure starts)
- Miami, Florida (992 foreclosure starts)
- Houston, Texas (866 foreclosure starts)
States with the highest foreclosure rates in Q3 2021 were:
- Nevada (one in every 1,463 housing units with a foreclosure filing)
- Illinois (one in every 1,465)
- Delaware (one in every 1,515)
- New Jersey (one in every 1,667)
- Florida (one in every 1,743)
States that posted the largest number of completed foreclosures in Q3 2021:
- Illinois (965 REOs)
- Florida (564 REOs)
- Pennsylvania (480 REOs)
- Michigan (401 REOs)
- New York (370 REOs)
Monthly Foreclosure Trends: The report also shows there were a total of 19,609 U.S. properties with foreclosure filings in September 2021, up 24 percent from the previous month and up 102 percent from September 2020. September foreclosure actions were almost 70 percent lower than they were before the COVID-19 pandemic in September of 2019. Nationwide in September 2021, one in every 7,008 properties had a foreclosure filing. Lenders completed the foreclosure process on 2,682 U.S. properties in September 2021, up 8 percent from the previous month and up 33 percent from a year ago.
In 2021, home prices are rising at the highest rate in history, outpacing even the housing bubble preceding the Great Recession. This is, however, most likely not a bubble. Today's housing market is not at all like the mid-2000s bubble that ruined the US economy. Unlike back then, there is now a severe housing scarcity, and housebuilders are treading carefully when it comes to adding new supplies. The current supply scenario is the polar opposite of the building glut of 15 years ago: there was a major overbuilding problem back then.
Around 2 million houses were created every year at its height, compared to around 1.6 million presently. Also, during the last boom, home demand was artificially boosted by the fact that some people with little or no income could obtain loans. This time, lenders are acting much more responsibly. There is little leverage, and mortgage underwriting is considerably better than it was during the Great Recession. More existing homes were sold last year than in any year since 2006. The latest existing-home sales data shows the tightest housing market on record.
The demand has not gotten significantly stronger since May/June of 2020, and buyers and sellers are continuing to connect at a record pace. This trend shows that the housing market is as strong as it was during the housing bubble of the mid-2000s. It is nowhere too close to a level where you can imagine the balance of real estate market conditions. Speedy home sales continue in all regions of the country and the median sales price continues to have double-digit growth.
Although millions were laid off or furloughed it didn’t prevent house hunters from buying homes across the nation. As a result, the housing market saw the highest pace of sales growth since the height of the unprecedented housing boom in 2005. That expansion was driven by negligent lending in the subprime mortgage market and the current housing boom is driven by the intense demand and record-low mortgage rates. As prices keep climbing month-over-month, it just shows the resilience of the US housing market in the face of an ongoing economic recession.
Although sellers are listing more & more homes we need more new home supply to add to inventory and slow these sharp price increases. When Many market watchers are curious to know how long will this housing boom last or will the market eventually crash? Well, so far, the housing market continues to be sizzling hot resulting in higher home prices and quick-selling homes. The only factor of concern is the housing supply which continues to fall short of demand.
Increasing the supply of homes for sale would certainly help bring balance to this strong seller’s market, but the most recent housing market trends don't suggest that inventory is likely to improve soon. The US housing market is far from crashing in 2021 or 2022. It continues to play an important supportive role in the country’s economic recovery. Current economic conditions resemble a “swoosh” pattern, with the initial impact from the lockdown followed by a gradual recovery as the economy reopens.
Mortgage rates and slow but steady improvements to the job landscape continue to propel confidence for first-time buyers. The pace of existing-home sales has jumped to a level not seen since 2006 and, importantly, was followed by strong pending sales, purchase mortgage applications, and construction data. The U.S. economy is expected to grow 6.8 percent in 2021, up from a prior 6.6 percent, on a fourth quarter-over-fourth quarter basis, according to the latest forecast from Fannie Mae's Economic and Strategic Research (ESR) Group.
Their 2022 forecast remains unchanged at 3.0 percent. Economic growth rebounded sharply in March following a weather-related pullback in February. Growth has been supported by waning COVID-19-related restrictions as the vaccination effort progresses, as well as a bolstering of household incomes from the latest stimulus bill. Uncertainty remains over the speed and duration of the current leg of the recovery, but we continue to anticipate a brisk acceleration in the near term, with growth in the second quarter expected at 9.1 percent annualized.
As Federal Reserve has made clear that it has no intention of raising interest rates soon, many households are seizing the opportunity to refinance their existing mortgages. However, additional uncertainty surrounds the timing and implications of the end of the forbearance policies, which provide a temporary pause in mortgage payments to provide relief for those who might be struggling financially for whatever reason. The question that everyone in the industry is asking right now is that how those might impact the number and nature of home sales.
What are foreclosures going to look like once the foreclosure moratoria and forbearance programs come to end? A primary difference this time is that homeowner equity is at an all-time high: over $6.5 trillion. According to RealtyTrac’s parent company ATTOM Data, about 70% of homeowners have more than 20% equity. According to Fannie Mae, the continued improvement in the labor market and higher levels of home equity will likely help limit distressed sales in 2022. So, this record level of homeowner equity means that as foreclosure moratoria eventually expire, the overwhelming majority of distressed assets are likely to be sold well before the foreclosure auction.
The U.S. housing market 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.
In 2022, we will see higher mortgage rates and, as they continue ticking up, which may begin to create a ceiling on the median home price growth, as monthly payments on new mortgages become less and less affordable. Homebuilding will continue and new homes will pile up a bit which will slow down the rate of price appreciation. There are reasons to believe that the housing market will remain tight in 2022 because there are first-time buyers (Millennials) coming into the market.
About 4.8 million millennials are turning 30 this year and will continue to do so for the next three years, a significant positive force for the economy and housing. The main challenge for markets is meeting this upsurge in demand with a declining supply. A recent Zillow survey shows that millions will enter the housing market in 2022 to purchase their dream house.
In their survey, more than 1 in 10 Americans (10%) said they moved in the past 12 months, either by choice or circumstance. And now, with the COVID-19 vaccine circulating and the economy slowly picking up steam, Zillow researchers say millions of more households could be potential homebuyers in 2022. We have seen a huge influx of movers wanting to take advantage of larger houses and larger plots for a fraction of the price they would pay in the metro area.
More affordable and medium-sized subway areas across the Sun Belt have seen significantly more people coming than going – especially from more expensive, larger cities to the north and coast. The new construction of single-family homes is expected to grow next year. Even though new home prices are rising due to an increase in lumber prices, the lack of existing homes for sale means new construction is the only option for some prospective home buyers.
US Housing Market Price Trends
In today's housing market, buyers are driving up property prices, leading homes to sell rapidly. Some hyperactive buyers make offers without seeing the property and forego contingencies to win bidding wars in the highly competitive housing market. The historically low mortgage rates have fueled an increase in demand, particularly among millennials. However, they are running into a shortage of available housing. Many buyers are still in the hope of finding a home that fits their budget and needs.
Despite popular belief that now is not a good time to buy, many home buyers are looking to lock in their monthly housing payments by taking advantage of still-low mortgage rates. However, in this hot real estate market, it's difficult for buyers to find a good deal, especially with the typical asking price rising by double digits. Although the housing market is still expected to favor sellers we appear to be at a tipping point in the housing market, where prices have risen so dramatically that buyers are backing off and home sales are slowing down.
House prices rose nationwide in August, up 1.0 percent from the previous month, according to the latest Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices rose 18.5 percent from August 2020 to August 2021. The previously reported 1.4 percent price change for July 2021 remained unchanged.
The 12-month changes ranged from +14.9 percent in the West North Central division to +25.8 percent in the Mountain division. The FHFA HPI is the nation's only collection of public, freely available house price indexes that measure changes in single-family home values based on data from all 50 states and over 400 American cities that extend back to the mid-1970s.
U.S. House Price Index Report 2021 Q2
Due to the brisk demand, purchasers have been frantically bidding up the prices of available houses, sending property prices skyrocketing. House prices in all the major local real estate markets continue to rise. The housing market is becoming harder for home buyers. The demand is high, and the supply and inventory are lacking.
U.S. house prices rose 17.4 percent from the second quarter of 2020 to the second quarter of 2021 according to the Federal Housing Finance Agency House Price Index (FHFA HPI®). House prices were up 4.9 percent compared to the first quarter of 2021. FHFA’s seasonally adjusted monthly index for June was up 1.6 percent from May.
“During the second quarter, house prices peaked in June with an 18.8 percent growth rate compared to a year ago,” said Dr. Lynn Fisher, Deputy Director of FHFA’s Division of Research and Statistics. “For the quarter, annual gains surpassed 20 percent in the Mountain, New England, and Pacific census divisions and in all of the top 20 metro areas.”
- House prices have risen for 40 consecutive quarters, or since September 2011.
- House prices rose in all 50 states and the District of Columbia between the second quarters of 2020 and 2021.
- House prices rose in all of the top 100 largest metropolitan areas over the last four quarters.
- Annual price increases were greatest in Boise City, ID, where prices increased by 41.1 percent.
- Prices were weakest in San Francisco-San Mateo-Redwood City, CA, where they increased by 4.5 percent.
The top five states with the highest annual house appreciation were:
- Idaho 37.1 percent
- Utah 28.3 percent
- Arizona 23.9 percent
- Montana 23.7 percent
- Rhode Island 23.7 percent
The states showing the lowest annual house appreciation were:
- Alaska 8.2 percent
- North Dakota 8.7 percent
- Louisiana 9.6 percent
- Mississippi 11.4 percent
- Iowa 11.5 percent
The housing demand will continue to surge due to several factors. For e.g; the millennials have aged into their prime homebuying years, and they are now the fastest-growing segment of home buyers. In 2018, millennial homeownership was at a record low but the situation has changed markedly. They are no longer holding back when it comes to homeownership. According to the National Association of REALTORS’ Home Buyers and Sellers Generational Trends Report, millennials make up the largest share of the homebuying population at 38 percent. The older millennials (aged 30 to 39) make up 25 percent of that and younger millennials (age 22 to 29 years old) make up 13 percent.
These younger consumers are mostly buying first homes (86 percent of younger millennials and 52 percent older ones). According to Bloomberg, not only are millennials buying homes but their “starter homes” are multimillion-dollar homes rather than the traditional humble first property.
Millennials are expected to continue to drive the market in 2021 and the participation of first-time homebuyers and older millennials is widely forecast to be elevated. Hence, the “2021 housing market” is looking to be super-competitive for home buyers. With homebuyers active and supply still lacking, the current pace of home price growth seems unlikely to change in the near term.
Therefore, homebuyers have to face more competition and act more quickly than usual to snag their dream home. Housing prices had already started rising before the pandemic arrived but the pandemic created a rapid acceleration in double-digits. In a new Urban Institute report, researchers found that if the country continues down the same road, over the next two decades the US homeownership rate is set to decline to 62.1 percent. They project the overall homeownership rate will fall from 65 percent in 2020 to 62 percent by 2040.
Household growth averaged 12.4 million per decade from 1990-2010, 7.3 million from 2010-2020. They estimate an average growth of 8.5 million from 2020-2030 and 7.6 million from 2030-2040. This decline is the result of slowing US population growth and lower headship rates for most age groups. Another key finding is that the renter growth will be more than twice the pace of homeowner growth from 2020 to 2040. Between 2020 and 2040, there will be 9.3 million net new renter households, a 21 percent increase.
The main reason behind such an extreme pace of home price appreciation is the basic economic seesaw of supply and demand. The country needs far more units to meet demand but there has been a large and persistent shortfall in recent years. On top of that, the pandemic has knocked down homebuilders' ability to fill the housing supply as they are running out of land.
The housing market has already been running too short of previously owned homes. Buyers are scrambling to take advantage of plummeting mortgage rates that make the cost of buying a home much cheaper. The number of homes for sale has plummeted and remained down around 30 percent of what it has been in recent years — leaving the market with nearly twice the demand and two-thirds of the supply.
Both the inventory of homes and mortgage rates are now at their historic lows. The months’ supply of existing homes for sale has fallen to 1.9 months, the lowest level since the series began in 1999. With inventories this tight, it is unlikely that existing home sales can continue to rise at last year's pace, which means there could be a little slowdown in existing sales throughout 2021. ESR Group expects home sales to rise 3.8 percent in 2021.
The rise in remote work has also sparked a new suburban boom and the scarcity of developed land means that builders could be unable to meet the rising demand and home prices would continue to rise in 2021. One thing that has been talked about a lot is that suburban housing markets are booming because of outbound migration from cities. The pandemic has caused some homebuyers to search for homes in a different area than originally planned.
Various surveys indicate that interest in rural areas and suburbs is up and interest in urban areas is down. However, Zillow published an exhaustive study examining every conceivable housing-market data point related to cities and suburbia to see if there are major divergences that suggest an urban-to-suburban migration trend.
According to that study, suburban housing markets have not strengthened at a disproportionately rapid pace compared to urban markets. Both region types appear to be hot sellers’ markets right now – while many suburban areas have seen a strong improvement in housing activity in recent months, so, too, have many urban areas.
Nevertheless, the pandemic has increased the desire for houses with a bit more space and a garden. Couple that with record-low interest rates, and prices are rising dramatically all over the country from urban-to-suburban markets.
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