Housing Market Predictions 2022 | 2023 | 2024 | 2025
In this article, we provide housing market predictions for 2022. We also discuss the factors driving the housing market over the next few years and the predictions for 2023, 2034, and 2025. The housing market is expected to continue its upward trend in the coming years. But there are some factors that could affect the market. Let’s find out more about these factors.
Is the U.S. housing market eventually going to crash? Despite the clear signs of a slowing market, it remains competitive for homebuyers, with new records set for home-selling speeds and price increases. Home prices are rising due to a mismatch between supply and demand, but this is not a housing bubble. Many experts predicted that the pandemic would cause a housing crash on par with the Great Depression.
That, however, is not going to happen. The market is in far better shape today than it was a decade ago. The housing industry has had a boom last year, with the largest annual gain in single-family house values and rentals, historically low foreclosure rates, and the highest number of home sales in 15 years, reaching 6.9 million for the entire year.
The national home prices have increased 33 percent over the previous two years. The market was driven by record-low borrowing rates in 2020 and 2021 and a constrained supply due to underbuilding. The tremendous demand from first-time homeowners is almost as crucial as the restricted new supply. The exceptionally favorable age demographic trends are also the driving force behind the current housing market.
According to Freddie Mac, there are currently 18 percent more persons aged 25 to 34 than there were in 2006. This represents an increase of 6.6 million prospective first-time homeowners, from 39.5 million in 2006 to 46.1 million today. In addition to the increase in first-time homebuyers, the number of high-income renters who can afford to buy and are of prime first-time homebuyer age has also been growing.
In 2006, lending criteria were significantly loosened, and little examination was done to determine whether or not a borrower had the ability to repay their loan. These days, the requirements are more stringent, which lowers the risk for both the lenders and the borrowers. Consistent with a more challenging housing market for buyers, the share of buyers that faced at least one mortgage denial before getting approved grew from 22% in 2020 to 34% in 2021.
The government and jumbo segments had the most significant tightening in the previous month. These two housing markets couldn’t be more different from one another, and the current situation is in no way comparable to that of the past. The Mortgage Credit Availability Index (MCAI) is an index that is released on a regular basis throughout the year by the Mortgage Bankers Association (MBA). This index is used to measure how simple it is to get a mortgage.
The higher the index is, the more options there are for obtaining mortgage finance. In 2004, the index was hovering around the 400 mark. As the housing market heated up, mortgage loans became more available, and then in 2006, the index surpassed 850. The mortgage credit availability index (MCAI) fell as a result of the fall in the real estate market since it became nearly hard to get mortgage financing.
Since then, thankfully, the conditions for lending have been relaxed a little bit, although the index is still rather low. The index had a reading of 120.0 in May, which is around one-seventh of what it had been in 2006. It remains more than 30 percent below pre-pandemic levels. Because there aren’t as many options on the housing market, a lot of people in the United States are having a hard time finding the house of their dreams.
Communities all around the country are struggling because of low inventories. Over the past decade, chronic underbuilding and the influx of millions of millennials into the homebuying market have resulted in a major mismatch in housing supply and demand. Despite the fact that mortgage rates are skyrocketing, the housing market is not going to crash any time soon. The result will be a much slower rate of appreciation than in the past two years.
Housing Market Predictions For 2022
What is the effect of rising mortgage rates on the housing market? Freddie Mac’s own regression research indicates that a 1 percent rise in mortgage rates reduces home price increases by around four percentage points (for example, moving from 11 percent home price growth a year to 7 percent ). In contrast, analysts at J.P. Morgan expect a greater impact of around six percentage points lower home price increase.
Since home values are so high, the housing market may be more susceptible to rate increases than in the past; therefore, the greater estimate appears realistic. While it seems apparent that rising interest rates will reduce housing demand by reducing affordability, the actual past is a significantly less reliable indicator of what will occur because of a huge balancing impact – interest rates often rise when the economy is expanding.
The government-sponsored enterprise forecasts that for every one percentage point increase in mortgage rates, house sales would decrease by around five percent, and price growth will slow by four to six percentage points. If mortgage rates stabilize at current levels, and all other factors remain constant, their analysis predicts a much slower, but still positive house price rise with a wide regional range depending on migration trends.
As work-from-home becomes increasingly popular, it is anticipated that the housing market will continue to be undersupplied and that migration to lower-cost areas will continue to rise. This is significant since most booming cities have a major housing shortage due to a previous inflow of population.
Finally, favorable demographics suggest that the robust demand for first-time homebuyers will persist. This is due to the fact that there are still a substantial number of younger renters with sufficient income to sustain homeownership, and they should continue to be a formidable force for the foreseeable future. As the economy faces various headwinds in the next months and years, these variables should continue to exert a substantial influence on the housing market.
The quarterly housing outlook pulse poll conducted by Freddie Mac assesses public attitude on housing-related problems. Since the beginning of the epidemic, market confidence has reached its lowest point in the second quarter of 2022. In addition, as a result of the impact of growing inflation on the cost of living, they found an increase in housing payment difficulties, particularly among renters.
51% are confident the housing market will remain strong over the next year.
This is down 7 percentage points from last quarter.
56% of renters and 24% of homeowners spend more than 30% of their monthly income on housing.
51% are concerned about making housing payments, up 4 percentage points from last quarter.
This is true for 68% of renters (a 10-percentage point increase from last quarter) and 38% of homeowners (a 3-percentage point decrease from last quarter).
24% are likely to buy a house in six months.
17% of homeowners are likely to sell in the next six months.
23% of homeowners are likely to refinance in the next six months.
Source: Freddie Mac
The S&P CoreLogic Case-Shiller U.S. National Home Price Index® rose 20.4% year-over-year in April (non-seasonally adjusted), down from 20.6% in March. The annual growth was faster in April than in March in both the 20-city index (to 21.2%, from 21.1%) and the 10-city index (to 19.7% from 19.5%). The annual growth was faster in April than March in only 9 markets included in the 20-city index.
Case-annual Shiller’s house price increase is predicted to decelerate in all three indices. Monthly appreciation in May is predicted to slow from April in both city indices and to be unchanged in the national index. Even while inventory is increasing, there is still a considerable amount of room until it reaches its pre-pandemic level. Nonetheless, when combined with reasonably robust demand, low inventory will continue to be a driver for persistent high pricing, even if sales volume declines due to affordability concerns.
As a result, it is predicted that more buyers would be on the sidelines in the coming months of 2022, allowing inventory to recover and price growth to decelerate from its peak, If it happens, it will restore the housing market to a more stable, balanced state in the long run and provide more homeownership opportunities for those priced out of the market today.
The updated housing market forecast by Realtor.com® has been released as a mid-year update. After more than a year of skyrocketing demand, and skyrocketing home prices, the housing market appears to be cooling off. The housing market is not collapsing, but it is heading towards more balanced conditions from an unsustainable peak of last year.
This year, mortgage rates have risen by more than two and a half percentage points. Furthermore, the increasing expenses of purchasing a home have altered many prospective purchasers’ calculations. As a result, year-over-year house sales have fallen in recent months. A record 79 percent of respondents in a Fannie Mae study on homebuyer sentiment indicated it’s a poor time to buy a home.
Home sales activity kicked out 2022 stronger than anticipated, but rising costs have led to alter their forecast downward. Realtor.com now forecasts a 6.7% decline in house sales in 2022. They anticipate the greatest year-over-year decline in house sales at the customary peak of the summer selling season. Home sales on par with these predictions would mean that 2022 sales are the 2nd highest tally since 2007, trailing only 2021.
Sales of existing homes have declined 8.6% year-over-year in May 2022. Declining home purchases means more people are renting. First-time buyers were responsible for 27% of sales in May, down from 28% in April and down from 31% in May 2021. Affordability has been hit with a triple whammy of rising interest rates, fast house price increase, and inadequate supply.
In the second half of 2022, house price growth will moderate, although it has been hotter for longer than anticipated, resulting in an upwardly revised forecast of a 6.6% home price rise for 2022. That’s an increase from their previous forecast of 2.2% growth in home prices. More than a decade of chronic underbuilding, coupled with millions of millennials entering the homebuying stage of life, has resulted in a major mismatch in housing supply and demand in the United States.
Therefore, don’t forecast a halt in the home price rise despite the fact that mortgage rates are rising significantly. While housing costs remain high, forcing homebuyers to make difficult decisions, it is predicted that the number of properties for sale will continue to increase, building on the reversal that began in May 2022. That is a sign of relief for first-time home buyers. Following a spate of volatility this week, the average rate on 30-year mortgages climbed to 5.78 percent from 5.36 percent the previous week, according to Bankrate’s national survey of large lenders.
Source: Bankrate national survey; figure includes points
Inventory has begun to shift in a different direction
Active listings increased 13 percent year over year in the most recent week. Increasing housing inventory is excellent news for buyers. Homebuyers will have additional options as a greater number of homeowners want to adapt their living situations to changing personal demands and take advantage of favorable market circumstances to access the substantial wealth they have accrued. Homeowners continue to be in a favorable position, particularly those who have owned for extended periods of time and amassed substantial wealth.
This is forecasted to attract additional sellers looking to capitalize on favorable market circumstances, resulting in increased competition and a rebalancing of the housing market away from its previous seller-friendly bias. This bodes well for seller-buyers who have been disappointed by the scarcity of purchasing possibilities.
The median sales price appreciation prediction for existing homes has increased from 2.9% to 6.6% for 2022.
The prediction for existing home sales has shifted from positive growth of 6.6% to an annual fall of 6.7%.
The forecast for inventory growth of existing homes for sale has increased from 0.3% to 15%.
Mortgage rates have been revised upward to reflect the major shift in monetary policy and financial conditions over the last 6 months.
In the second half of 2022, housing finance rates are predicted to climb at a more modest pace, which means that rates may hit 5.5% by year-end.
As mortgage rates have increased, prospective homeowners have submitted fewer loan applications.
According to the Mortgage Bankers Association, mortgage purchase applications decreased by 16 percent (in the week ending June 10) compared to the same week last year.
With mortgage rates, well above 5 percent, refinancing activity, which was brisk during the epidemic when rates were at an all-time low, has dwindled by more than 70 percent compared to last year.
The national median listing price for active listings in May was $447,000, up 17.6% from the previous year and up 35.4% from May 2020. In large metropolitan areas, the median listing price increased by 13% year over year. A rise in listing prices indicates strong demand and/or constrained supply. According to Realtor.com, this growth rate in asking prices could also partially be attributed to an increasing share of newly listed larger homes and sellers not yet adjusting to market conditions.
Moreover, there are housing market predictions that this adjustment is begun to take place. The percentage of properties with lowered prices climbed from 6.2% in May 2017 to 10.5% in May 2018 but is still 6.2% below the average for the years 2017 to 2019. In May, the percentage of price reductions increased in 49 of the 50 major metropolitan areas, up from 40 the previous month. Austin homes showed the greatest growth in the share of homes with price reductions compared to last year (+14.7 percentage points), followed by Las Vegas (+12.3 percentage points) and Phoenix (+11.6 percentage points).
Housing Market Predictions 2023
Here’s what some other experts predict will happen in the housing market in 2023 and the next couple of years. According to Zillow, the current typical value of homes in the United States is $344,141. This value is seasonally adjusted and only includes the middle price tier of homes. In April 2021, the typical value of homes was $284,000. Home values have gone up 20.9% over the past year. Zillow’s housing market forecast has been revised from April. The real estate group now forecasts 11.6% home value growth over the next 12 months (May 2022-April 2023).
Through April 2023, they predict a gradual deceleration in annual home value growth from the current rate of 20,9 percent to 11.6 percent. This is a decrease from the March forecast of 14.9% growth for the coming year. In the next three months, Zillow expects home values to increase by 5.2 percent, a decrease from the previous month’s forecast of 5.5 percent growth. Zillow’s forecast for existing home sales has been lowered as well, now predicting 5.73 million sales in 2022. That would mark a 6.4% decrease from 2021.
Even with these downwardly revised projections, the housing market in 2023 would still be extremely robust.
In the history of the Zillow Home Value Index, which dates back to 2000, annual growth has only exceeded the current year-ahead prediction of 11.6% during this recent run of record-setting growth and for several months in 2005.
While 5.73 million existing-home sales would be a decline from 2021’s extraordinarily robust level, it would be the second-best annual total since 2006.
The downward revision was driven by rising mortgage rates, rising inventories, and pending home sales and mortgage application data that were weaker than anticipated.
Source: Zillow
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. Despite declining buyers’ optimism that now is a good time to buy a house, the number of households interested in becoming homeowners remains high. This is especially true for younger homebuyers, who are likely first-time buyers and are struggling to save for a down payment as rents continue to reach record highs.
Simultaneously, seller expectations for larger down payments appear to be increasing, fueled by a still-competitive housing market and repeat buyers with relatively more available equity. The housing market is unlikely to shift from a seller’s to a buyer’s market anytime soon. Rising mortgage rates may take some of the steam out of the market, allowing inventory to rise slightly. It would also slow the rate of home price appreciation and reduce the possibility of a red-hot housing market resulting in an overheated market.
The supply of available homes is so low that even a significant drop in demand due to higher interest rates will not turn this into a buyer’s real estate market, according to industry experts. Because there are not enough houses available to meet demand, home prices will continue to rise, but the combination of rising home prices and elevated mortgage rates means fewer people will be able to afford to buy.
There would still be continuous price appreciation, scarcity of inventory, and good demand. Some markets will experience lower appreciation rates than others, with the Sunbelt performing particularly well. Home prices do not appear to be decreasing, even in some of the country’s most expensive markets, the tier one markets. For example, according to CoreLogic, these large cities continued to experience price increases in February, with Phoenix on top at 30.4% year over year. The second rank was held by Las Vegas with 26.5% year-over-year price growth followed by San Diego (25.2%).
Now that mortgage rates have reached the 6 percent barrier, a worldwide research firm, Capital Economics, predicts that the U.S. house price rise will likely slow in 2023, not this year. Capital Economics forecasted that the U.S. housing market will experience a 5 percent decrease in house price growth by mid-2023, followed by a “gradual rebound” to a 3 percent annual price rise by the end of 2024. It’s a major analysis that arrives as the U.S. housing market begins to shift, with increasing mortgage rates pricing out or discouraging potential homeowners.
However, the firm does not forecast a spectacular “price decline” or a housing bubble bust similar to that of 2006, which precipitated the global financial crisis and the Great Recession. A 5 percent fall would definitely constitute a price decrease, but it would not cause home prices to spiral out of control. Keep in mind that house prices have risen steadily for several years and surged significantly during the COVID-19 epidemic.
A price drop is noteworthy, but in the grand scheme of things, it is rather little. Prior to the housing bubble of 2006, the U.S. housing market was primarily supported by exceedingly risky bank lending methods that produced a synthetic demand for housing, allowing those who could not afford to retain their homes to acquire them. According to analysts, today’s market does not have the same circumstances.
According to analysts, today’s market does not have the same circumstances. Capital Economic forecasts that mortgage rates would increase to 6.5 percent by 2023. According to Matthew Pointon, a senior property economist at Capital Economics, if home price growth follows our earlier predictions and declines to zero by mid-2023, mortgage payments would remain above their mid-2000s peak until mid-2023.
“That looks unsustainable and house prices are therefore set to fall. However, our previous point about a lack of forced sellers remains. Therefore, we expect lower home demand to lead to a relatively small fall in house prices, with annual growth dropping to -5% (year over year) by mid-2023,” Pointon added. “That would bring the mortgage payment burden back under the mid-2000s level by the start of 2023.”
Housing Market Predictions 2024
The Zillow home price expectations survey found that the housing market is likely to recover to pre-pandemic, 2019 norms by 2024, at least in terms of inventory and the proportion of purchases made by first-time home buyers. Home prices have grown 32 percent in the previous two years as a result of a shrinking number of properties on the market. The diminishing supply of available properties has been a major contributor.
Most panel members predict housing inventory to reach pre-pandemic levels by the end of 2024.
The share of first-time buyers is predicted to stay below 2019 levels until 2024.
The most bullish quartile of respondents predicted that prices will grow by 46.5 percent between now and the end of 2026, compared to only 10.3 percent for the most conservative group.
The average response predicts a total increase of 26.8% rise by the end of 2026 or a compound annual growth rate of 4.9 percent in the next (almost) five years.
Source: Zillow
The total inventory decreased from an average of 1,6 million units per month in 2018 and 2019 to a little over 1 million in 2021 and will decline further in 2022. The largest group of respondents (38 percent) to Zillow’s study predicts housing market inventory to rebound to a monthly average of 1.5 million units or higher in 2024. A second-largest of respondents (36 percent) predict that supply will return to pre-pandemic levels in 2023, while the third-highest proportion of votes (12 percent) came from those who believe it will happen in 2025.
The pandemic brought record-breaking price increases and rent increases that made saving for down purchases much harder. As a result, according to a Zillow survey of recent buyers, the percentage of first-time home buyers fell from 45 percent in 2019 to 37 percent in 2021. First-time purchasers would reclaim their pre-pandemic market share within the next two years, with 26 percent predicting 2024 and 25 percent predicting 2025.
About 18% of experts surveyed said they don’t expect the percentage of first-time buyers to surge over 45% until after 2030, despite many Millennials, the largest U.S. generation ever will be well into their prime home-buying years far before then. The median age of U.S. buyers is 43, while the average skews higher (45 years old). Almost one in five buyers (17%) are in their twenties or younger, while roughly a quarter (23%) are in their sixties or older. In other words, the age distribution of buyers represents somewhat of a middle ground when it comes to the U.S. population.
They are typically younger than tenured homeowners (those who have not moved in the past year), but older than renters. Buyers tend to have higher household incomes than the U.S. population overall. The annual median household income among buyers is approximately $86,000, compared to the overall national median (2019) of $65,700.
Will The Housing Market Crash in 2022?
The overarching question is will the housing market crash or when, exactly, between 2022 and 2025? The simple answer is that it will not crash anytime soon? Rising rates are cooling the market as some expected but the prices are still rising at a slower rate. The current trends and the forecast for the next 12 to 24 months clearly show that most likely the housing market is expected to see a positive home price appreciation.
In recent years, the price of homes has climbed dramatically. Many prospective buyers, especially those with limited financial resources, are eager to hear whether and when home prices will become more accessible. Here is when housing market 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, 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. Ultimately, for rising interest rates to destroy home values, we’d need substantially less demand and far more housing supply than we presently have. Even if price growth moderates this year, it is extremely improbable that home prices will crash. Thus, there will be no crash in home prices in 2022; 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 and 2023.
Affordability will be a concern for many, as home prices will continue to rise, if at a slower pace than the previous year. 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 last year 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 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 this year. 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 sectors, mortgage rates are rising, and jobs are also recovering. 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. Tight supply following years of underbuilding, combined with increased demand due to remote work, and US demographics — will continue to be a factor in 2022 & 2023. It will continue to be a seller’s real estate market in 2022. Expect to see bidding wars on hot properties for sale, especially in this summer home-buying season.
When Will the Housing Market Crash Again: 2023, 2024, or 2025?
The housing market will not crash in 2023, 2024, or 2025. Let’s look at what experts forecast regarding the US housing market through at least 2023, and you’ll get a better idea of what to expect. Most of them say that prices aren’t likely to drop in the near future. The housing market is coming off a year in which home prices in the United States increased by an unsustainable 18.8%.
Will the market continue to grow at this rate or will it be a little less frenetic this year? The housing market is even tighter now than it was prior to the spring 2021 housing frenzy. The lack of inventory and decade-high interest rates likely weighed heavily on the minds of prospective buyers in April.
An already challenging market with limited inventory and record price growth has become even more unfavorable for homebuyers as a result of an unprecedented interest rate increase. Even industry titans like Zillow decreased their bullishness in May, decreasing their projected home price growth rate from 20.9% to 11.6% growth through April 2023.
According to another study by Zillow, the total value of the private residential real estate in the United States increased by a record $6.9 trillion in 2021, to $43.4 trillion. Since the lows of the post-recession market and the corresponding building slump, the value of housing in the United States has more than doubled. The most expensive third of homes account for more than 60% of the total market value. The market value hit the $40 trillion mark in June of last year and since has been gaining an average of more than half a trillion dollars per month.
One of the most widely held housing market predictions for 2022 & 2023 is that inventory will remain scarce but price appreciation will be slower than it was in the last two years. While spring and summer 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 the pandemic, with high demand for homes in almost every area of the nation. The same trend will follow from 2022 to 2023.
The shortage of inventory has created a red-hot housing market, with homes selling within hours of being listed, frequently for well over the asking price. According to many housing experts, buyers can predict similar trends this year to those seen over the last two years: increased prices, low inventory, and quick turnaround.
However, some significant hurdles are approaching the US housing market. Most experts had predicted mortgage rates for housing to rise this year. The cost of borrowing money through mortgages has been steadily increasing this year. Most experts predicted that mortgage rates would climb this year, but they did so more quickly than expected, averaging more than 4% for 30-year fixed-rate mortgages in mid-February. Around mid-April, it surged to 5.28 percent, the highest level since April 2010, and the uptick continues.
Monthly affordability will suffer as interest rates rise, but we’ll also lose more of the investment-type buyers looking for once-in-a-lifetime leverage. As a result, rising interest rates may also imply a more stable market. With rates that low in 2021, all kinds of buyers rushed in, and with little housing supply to match, price rise has been ferocious.
This also emphasizes affordability. The basics of housing needs would still continue to drive primary purchases forward. It’s a good thing that the housing market will be less heated in 2022 and 2023. Let’s take a closer look at why the housing market is showing some signs of a slowdown in 2022 & beyond.
Mark Zandi, the chief economist of Moody’s Analytics, said he is concerned about a harsh landing in the housing market, but he believes the market and economy will not collapse as they did last time. He believes that for the 2023 housing market, home prices will level off, decreasing in certain sections of the country while rising somewhat in others. In comparison to the rise in 2022, this prediction for 2023 appears fairly reasonable.
The CoreLogic HPI Forecast shows that higher mortgage rates erode buyer affordability and should dampen demand in the coming months, leading to the moderation in price growth in their forecast. Their forecast indicates that home prices will increase on a month-over-month basis by 1% from May 2022 to June 2022 and on a year-over-year basis by 5% from May 2022 to May 2023.
Source: CoreLogic [May 2022 to May 2023]As intended, a slowing home price increase indicates the damping effect of rising mortgage rates on housing demand. As a result of a roughly 50 percent increase in monthly mortgage costs over the past several months, there are now fewer purchasers competing for a consistently constrained inventory. And despite the fact that the yearly home price increase currently surpasses 20 percent, CoreLogic anticipates a dramatic decline in the next year.
However, the normalization of overheated purchasing circumstances should lead to a greater equilibrium between buyers and sellers and a stronger housing market overall. Nationally, home prices increased 20.2% year over year in May. No states posted an annual decline in home prices. The states with the highest increases year over year were Florida (33.2%), Tennessee (27.4%), and Arizona (27.3%). These large cities continued to experience price increases in April, with Phoenix on top at 28.7% year over year.
Source: CoreLogic
Fannie Mae’s housing market forecast released in June 2022 is also less bullish. As the year proceeds, the cumulative impacts of greater inflation and higher interest rates are anticipated to weigh more on economic growth and house sales. Significantly higher mortgage rates are now the key restriction on the housing market.
The ESR Group anticipates a 13.5 percent reduction in total house sales in 2022, which is a steeper decline than the 11.1 percent decline predicted last month, and a commensurate decline in mortgage originations to $2.6 trillion in 2022 and $2.2 trillion in 2023. The significant, sudden rise in interest rates is beginning to be felt widely in housing affordability. The prospective monthly payment on a typical new mortgage is climbing dramatically due to which both new and existing home sales continue to slow.
The FMHPI is an indicator for typical house price inflation in the United States. It shows that home prices increased by 11.3 percent in 2020 and 15.9 percent in 2021, as a result of robust housing demand and record low mortgage rates. According to Freddie Mac’s quarterly housing forecast released in April 2022, house value growth in 2022 will be less than half of what we’ve witnessed last year.
As a result of the increase in mortgage rates, Freddie Mac predicts that housing demand will weaken and house sales will decrease to 6,7 million in 2022 and 6,6 million in 2023. As a result of rising mortgage rates, we anticipate that home price appreciation will decelerate in 2022, with a full-year house price increase of 10.4% in 2022 and 5% in 2023.
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. The government-sponsored enterprise predicts that home purchase mortgage originations will increase from $1.9 trillion in 2021 to $2.1 trillion in 2022 and $2.2 trillion in 2023, as a result of rising housing prices and anticipated home sales.
With rising mortgage rates anticipated to persist, they foresee a decline in refinancing activity. According to their projections, refinancing originations will decrease from $2.8 trillion in 2021 to $960 billion in 2022 and $535 billion in 2023. From a peak of $4.8 trillion in 2021, they expect total originations to decrease to $3.1 trillion in 2022 and $2.8 trillion in 2023.
Source: Freddie Mac
References
https://www.bankrate.com/mortgages/analysis/
https://www.bankrate.com/mortgages/mortgage-rates/
https://www.freddiemac.com/research/forecast
2022 Housing Market Forecast Midyear Update: More Options for Home Shoppers
https://www.nar.realtor/research-and-statistics/housing-statistics/
https://www.zillow.com/research/home-values-sales-forecast-jan-2022-30667/
https://www.zillow.com/research/daily-market-pulse-26666/
https://www.zillow.com/research/zillow-2022-hottest-markets-tampa-30413/
https://www.fhfa.gov/DataTools/Downloads/Pages/House-Price-Index.aspx
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https://www.nar.realtor/research-and-statistics/housing-statistics/housing-affordability-index
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https://www.mba.org/news-and-research/research-and-economics/single-family-research/mortgage-credit-availability-index-x241340
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