A panel of economists and housing experts is also split on whether sales will rise or fall in 2022, as worries about deteriorating affordability collide with expectations of rising inventories.
Surveyed, 41% of respondents to the latest Zillow survey on house price expectations (ZHPES) said sales will increase, 41% predict a slowdown and 18% believe sales will stay about the same.
There were about 6.32 million homes sold from January to November 2021, the highest number of sales during this period since 2006. Of those, about 5.61 million were existing homes. Zillow’s own forecast calls for an uptick in existing home sales in 2022, building on recent sales performance, household formation rates and the expectation that mortgage rates will remain relatively low, providing attractive financing. for home buyers.
“In the frenzied pandemic-era U.S. housing market, buyers and sellers alike defied expectations: Buyers forged in the face of record price appreciation, and homeowners staunchly refused to take advantage of this opportunity to sale,” Jeff Tucker, senior economist at Zillow, said in prepared remarks.
“The outlook for home sales in 2022 depends on which side gives way first. If buyers ultimately balk at unaffordable prices, sales volumes could plummet. But if homeowners finally start listing their homes en masse, we could see to a windfall in sales, slowing the pace of appreciation.Our expert panel was split in two on what scenario to expect.
Panelists who forecast lower sales in 2022 point to financial constraints on buyers as the main driving factors. Deteriorating home affordability was cited by 54% of respondents as the main reason for declining sales, while rising mortgage rates were cited by 28%. As home values soared in 2021 — up a record 19.3% year-over-year in November — affordability saw its biggest drop since at least 2014.
“Affordability is quickly becoming the number one issue in housing markets today as prices have risen at the fastest rate on record,” Calvin Schnure, senior vice president, research and analysis at Nareit, told GlobeSt. .com. “Of course, affordability is tied to inventory, and it was the lack of home construction in the many years before the pandemic that created the conditions for today’s tight markets.
“New builds will take a long time to become available, suggesting affordability challenges may get worse before they get better.”
Take the pulse of certain markets
Lack of inventory was cited by Compass agents as the most influential factor heading into the 2022 real estate market. While more than half (56.4%) of Compass agents noted that the lack of housing supply will drive the 2022 market, 46.4% were optimistic about a slight increase in inventory over the coming year.
“The biggest factor I see affecting the housing market in 2022 is low inventory,” Paulo Prietto, Compass agent based in Orange County, Calif., told GlobeSt.com. “As long as inventories remain low, buyers will become more accustomed to the lack of choice and will continue to compete aggressively to buy homes.”
For Southern California specifically, Compass agents were a bit more conservative, with 43% of local agents expecting a slight increase in inventory across the region. Similarly, nearly 43% of Compass agents in the Chicago area also indicated a modest increase in housing stock for the area.
“A lot of people who rented last year will be buying this year,” Chicago-based Compass agent Kat Barry told GlobeSt.com, “and a few more homes will be on the market with some COVID relief, but it’s not going to be the big influx of inventory that we really need to make this a balanced market.”
Compass forecasts a seller’s market
More than three-quarters (76%) of Compass agents predict 2022 will be another seller’s market, with 18.1% of agents in this group predicting a “strong seller’s market.”
In Southern California, this sentiment was even stronger, with 90% of Compass agents expecting a favorable seller’s market, and nearly 37% of those respondents indicating a “strong seller’s market.”
Compass agents consistently indicated that they expected domestic house prices to rise in 2022, with 65.4% predicting an increase in sales prices and 76.6% citing an increase in rental prices.
“The continued limited inventory, with strong consumers driving up prices, first-time home buyers will continue to find it difficult to buy, leading to increased rental demand,” GlobeSt told .com South Florida-based Compass agent James Smith.