According to a new Realtor.com forecast, the U.S. housing market should be heading into saner territory for the rest of 2022, with supply and demand rebalancing as more homes hit the market and many potential buyers remain on the sidelines due to rising inflation and mortgage rates.
According to the forecast, which was released on June 13, the nation's home inventory will increase by double digits in 2022 compared to 2021, giving buyers a better chance of finding a home in what has been a very tight market since the beginning of the COVID-19 pandemic.
Home sales are expected to reach the second-highest level in 15 years, trailing only the pace set in 2021. Buyers will benefit from a significant increase in active listings, which Realtor.com now predicts will increase by 15% this year compared to last — far exceeding its previous prediction of a 0.3 percent increase in active listings.
According to the forecast, these trends, combined with the typically busy summer selling season and an increase in production from home builders, should result in a "refresh" in the housing market as early as this fall. House hunters who can afford historically high home prices should have plenty of options while others wait for prices to fall.
"Financial conditions have shifted significantly since the end of 2021, and the housing market has adjusted accordingly," said Realtor.com Chief Economist Danielle Hale in a press release. "As Americans grapple with higher prices for everyday necessities and today's buyers face housing costs that are up 50% from a year ago, recent home sales data shows that some are pulling out of the market."
The updated 2022 forecast anticipates that demand will "continue to decelerate through the summer," giving the inventory recovery "breathing room" to accelerate.
As a result, this fall could be an ideal time to buy a home — for both first-time and repeat buyers, Hale said. However, preparation will be critical throughout 2022, as it remains a seller's market with high asking prices. "If you decide to wait until later in the year, use that time to assess your budget so you're on the solid financial ground when you're ready to move forward."
Mortgage rates will rise 5.5 percent from a year ago, according to the most recent Realtor.com forecast, up from 3.6 percent previously predicted. This should contribute to a 6.7 percent decline in existing home sales, down from a 2.9 percent increase previously projected.
The current inflation rate, which is the highest since 1981, has a lot to do with the shifting forecast because it has put an additional financial strain on prospective home buyers. At the same time, historically low unemployment has given workers more bargaining power in negotiating higher wages and greater workplace flexibility. As a result, there are more opportunities to relocate to more affordable housing markets. Data from the first quarter of 2022 show that 40.5 percent of Realtor.com home shoppers viewed listings located outside of their current state, up from 33.4 percent in 2020, before the pandemic.
Overall, the updated 2022 forecast reflects a housing market on a path toward more sustainability relative to the previous two years of ups and downs, Realtor.com said. "Despite trailing 2021 levels, home sales are expected to hit a near record-high pace in 2022… Housing affordability will remain a significant barrier for many Americans as demand continues to outmatch supply, albeit by a smaller margin than in recent years."
Source: Go Banking Rates