Ralph Bivins of Realty News Report: Welcome to the Ralph Bivins Project. We’re here today in Miami at the National Association of Real Estate Editors 55th Annual Real Estate Journalism Conference. And we’re happy to have as our guest Frank Nothaft, chief economist of CoreLogic, a data and analytics firm focused on real estate and consumers.
Previously, Frank was the chief economist at Freddie Mac. So, I’ve been following his work for quite a while.
We’re here in December wondering what’s going to happen with real estate and the economy in the year ahead. So Frank, what’s going to happen in 2022?
Frank Nothaft: That’s a great question. That’s what a lot of people are asking. And It’s great to see you. It’s great that NAREE is getting back together and we’re able to meet in person. It’s been two years since we last met. Now, looking into 2022, we still see a really strong housing market.
HOME SALES TO HIT 16-YEAR HIGH IN 2022
We do expect home sales to rise and hit a 16-year high over the course of 2022. Now albeit with a little bit higher mortgage rates.
So, our forecast for 2022 is mortgage rates up only a little bit about 30 to 40 basis points, averaging maybe 3.4 percent over the course of 2022. Now that’s still historically very low, because when we look at three decades prior to the pandemic, 30-year fixed-rate mortgage rates, averaged 4.1 percent.
Ralph Bivins: So even if they inch up to 3.4 percent next year, every time mortgage rates go even a little bit, it knocks somebody out from being able to buy a house.
Frank Nothaft: Well, that’s true. And that’s what we anticipate will happen. When mortgage rates go up, especially with how much we’ve seen home prices go up, the buyers have to pull out, take a pause from participating in the purchase market. So we see some moderation of buyer demand in the coming year.
Major Change: A Little More Inventory (For a Change)
We also expect to see a bit more housing inventory – more supply come onto the market. And that’s why our forecast calls for a moderation of home-price growth. And as you know, this past year it’s been crazy, double-digit price growth.
(The nation’s home prices were up 19.1 percent in the 12-month period ending in October, according to the S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas.)
Ralph Bivins: What is your forecast for home-price growth in 2022?
Frank Nothaft: Our forecast is that home prices will be up in national index, but only about 3 percent over the next 12 months. So much, much slower than what we’ve seen in the last 12 months. This ties in with the decrease in home buyer demand and additional for sale inventory coming onto the market.
Three Sources of New Housing Supply in 2022
Ralph Bivins: The inventory shortage has been a huge issue. The supply of homes for sale has been incredibly small over the last two or three years. How will the market get an increase in inventory for sale?
Frank Nothaft: Yes, it is a huge issue and it’s not going to cure overnight. We’re not going to have ample inventory for sale everywhere. But I’ll tell you three sources that I do see adding to inventory in 2022. (1) Some of it is coming from new construction. I do think we’ll see an increase in single family starts and from home builders. So that’s going to be one part of the improving inventory picture.
(2) A second part comes from those homeowners (delinquent borrowers) who have been in mortgage forbearance for 18 months. Many of them will do just fine. They’ll get a loan modification and be able to be successful in making payments. But, unfortunately, not everybody. I do think there’ll be a portion who will still be in financial trouble and this will lead to distressed sales. So we’ll see some additional inventory coming from distressed sales. As you know, for the last year we’ve had a generational low in foreclosures. Well, I do think we’ll see an uptick, not a flood of foreclosures, but we’ll see an uptick as we head into 2022.
(3) The third piece comes from those existing owner-occupants who two years ago were planning on selling and relocating to another house. But then – boom! The pandemic hit and they said: “Whoa, I don’t want to move in the middle of a pandemic. I don’t want to have to be looking for a home or have strangers coming through my house.” But I think when we get to 2022, when much of the general population is vaccinated, more owner-occupants will be ready to sell.
Ralph Bivins: Thank you very much, Frank Nothaft of CoreLogic. That’s his forecast for 2022. It looks fairly positive.
Frank Nothaft: It looks really positive. So, thank you very much and we’ll see you soon. Absolutely.
Dec. 29, 2021 Realty News Report Copyright 2021
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File: Major Changes Predicted for Realty
File: Frank Nothaft. Major Changes Predicted for Realty Market in 2022. CoreLogic. #NAREE2021. National Association of Real Estate Editors. Freddie Mac.
File: Forecast. Major Changes Predicted for Realty Market in 2022. S&P CoreLogic Case-Shiller National Home Price Index.
Interview excerpt edited for clarity.