SAN DIEGO – (By Ralph Bivins of Realty News Report) – The nation’s housing market – after a wild surge that sent home prices up over 30 percent in some cities in 2021 – will be less intense next year, according to Lawrence Yun, chief economist of the National Association of Realtors.
“Next year is going to be essentially flat,” Yun told a massive audience at the San Diego convention center on Friday during the association’s annual convention.
“All markets are seeing strong conditions and home sales are the best they have been in 15 years,” Yun said. “The housing sector’s success will continue, but I don’t expect next year’s performance to exceed this year’s.”
The low inventory of homes for-sale pushed the housing market into a frenzy over the last 18 months. Sellers received multiple offers and buyers competed in bidding wars, jacking up home prices to record highs.
But Yun believes home construction will increase enough to tamp down the shortage somewhat. Plus, mortgage forbearance programs will cease and force more homeowners to sell their houses, he said, and that will increase inventory.
In addition, mortgage rates will go up in 2022, Yun predicted. Without the availability of 3 percent (or even lower) mortgage rates, the buyer frenzy will become slightly more normalized, he said.
Yun predicts mortgage rates will hit 3.7 percent in 2022 (for 30-year, fixed-rate mortgages.)
Other Forecasts from NAR Chief Economist Lawrence Yun:
One: The nation’s home prices will go up about 2.8 percent in 2022, down from the projected 14.7 percent increase in 2021.
Two: The number of homes sold will be down 1.7 percent in 2022, down from the projected 6.4 percent increase in 2021.
Three: Commercial real estate – Vacancy will continue to rise in the office market, the most troubled property sector. The average national vacancy will hit 13.5 percent in 2022, up from the projected 12.2 percent in 2021. The national multifamily vacancy rate will go down in 2022.
The work-from-home trend will have a profound impact on America. Office vacancy will increase as employers shrink their footprint. And work-from-home will influence homebuyers as they choose neighborhoods and residential locations for years to come.
Can Inflation be a Positive?
Inflation will impact real estate in 2022.
“Inflation is high and it could go higher,” Yun said.
Prices for building materials have skyrocketed. Shortages have developed for lumber, paint and virtually everything builders need. In the most acute need, the nation’s home builders currently have an extreme shortage of windows, construction experts say.
Mobile home prices are up 25 percent, Yun said.
Even though inflation could surge, the Realtors’ chief economist also pointed out a silver lining for real estate.
“Home values are a good hedge for inflation,” Yun said.
In the 1970s, inflation was shooting up about 7.1 percent annually, while home prices were going up an average of 9.9 percent, Yun pointed out.
So for Realtors looking for reason to say, “Now is a good time to buy” in 2022, remembering that real estate is considered an inflation hedge might be the key to closing more deals.
Nov. 15, 2021 Realty News Report Copyright 2021
Photo credit: Ralph Bivins, Realty News Report 2021
Caption: NAR Chief Economist Lawrence Yun addresses National Association of Realtors Convention in San Diego Nov 12. 2021.
For more about Texas real estate, check out the book Houston 2020: America’s Boom Town – An Extreme Close Up by Ralph Bivins. Available on Amazon http://tiny.cc/4a2g6y
Houston 2020 Ebook version https://tinyurl.com/4xm7z8b5
File: NAR 2022 Realty Forecast